Understanding GST on Food Delivery Charges: Swiggy and Zomato Explained

In the fast-paced world of online food delivery, understanding the intricacies of Goods and Services Tax (GST) is crucial for both consumers and service providers alike. This article aims to clarify the concept of GST on food delivery charges by explaining why Swiggy and Zomato apply GST differently and why it's necessary.

Swiggy’s GST Application: A Comprehensive Service Charge

Swiggy, one of the leading online food delivery platforms in India, operates as an aggregator offering both delivery services and a platform for restaurants to sell their food. According to Indian GST law, GST is applicable on the entire transaction value, which includes both the cost of the food and the delivery fee. This means that Swiggy charges GST on the total amount billed to the customer.

Why GST is Charged on the Total Amount?

Nature of Services: Swiggy operates an integrated model where they offer a combination of food delivery and restaurant platform services. The GST is levied on the comprehensive service provided, which includes the sale of food and the delivery service. Taxable Event: Under Indian GST law, the taxable event is the supply of goods or services. Since Swiggy assists in the sale of food and delivery of the same, GST applies to the entire invoice amount. Applicable GST Rate: For food delivery, the rate is typically 5% on the total bill amount. This ensures that the tax is levied proportionally to the comprehensive service provided. Compliance: Charging GST on the total amount ensures compliance with tax regulations, streamlining the process for both customers and tax authorities.

In summary, GST is levied on the total amount because it reflects the comprehensive service provided by Swiggy, which encompasses both the food and the delivery charges.

Zomato's GST Application: A Purely Goods Supplier

On the other hand, Zomato operates differently. Zomato is primarily a platform that supplies goods (food) and may not directly charge any delivery fee (though some versions of Zomato’s services might include it). According to the Directorate General of GST, Zomato's delivery charges are considered a taxable event because they are hiring delivery partners to facilitate the delivery of food, thereby continuing their business operations.

Compliance and GST Rules for Zomato

Since Zomato is a registered GST entity, they are required to collect GST on everything they sell. However, if a restaurant is actually GST-registered, Zomato can recover the GST that is paid to the restaurant as an input credit. This ensures that the GST system works efficiently and equitably.

It is important to note that Zomato does not pocket the GST amount; instead, they are required to remit it to the Central Board of Indirect Taxes. This further emphasizes the need for proper compliance with GST regulations.

Whatever Zomato charges is correct, and it's crucial to understand the GST implications for both businesses and consumers in this evolving digital marketplace.

Conclusion

The application of GST on food delivery charges varies between Swiggy and Zomato due to their different business models and how they are regulated by GST laws. While Swiggy charges GST on the comprehensive service, Zomato, as a goods supplier, charges GST on the invoice value of the goods.

Understanding these nuances is crucial for both service users and providers to ensure compliance with tax regulations and avoid any misunderstandings or disputes. As the food delivery ecosystem continues to evolve, staying informed about GST rules and their application will be key for businesses and consumers alike.

Keywords: GST on food delivery, Swiggy, Zomato