The 55th GST Council meeting, scheduled to take place on December 21 in Jaisalmer, Rajasthan, could bring significant relief to consumers ordering food via e-commerce platforms. Sources indicate that the Council is likely to discuss reducing the GST rate on delivery charges from the current 18% to 5%.
If approved, this reduction would apply retrospectively from January 1, 2022, as per recommendations by the GST Council-nominated fitment committee. However, businesses may face restrictions on claiming Input Tax Credit (ITC) for these reduced-rate transactions, potentially altering the tax dynamics for e-commerce operators.
Consumer Relief vs. Business Impact
The proposal aligns with the longstanding demand from food delivery platforms to have their services taxed at par with restaurant services. For consumers, this could result in cheaper food delivery costs, but for businesses, the 5% GST without ITC may pose challenges.
While the 18% GST allows operators to claim ITC benefits, switching to 5% without ITC could, in some cases, lead to a higher effective tax burden. Industry experts warn that smaller platforms, in particular, could be adversely affected by this shift.
Implications for GST Notices
Recent GST notices issued to major platforms like Zomato add another layer of complexity. For instance, Zomato received a ₹803 crore GST demand for delivery charges covering the period October 29, 2019, to March 31, 2022, issued by CGST authorities in Thane, Maharashtra.
If the proposal is cleared, Zomato could see relief for the last three months of this period, where GST would be recalculated at 5% without ITC instead of 18%.
Awaiting Final Decision
The GST Council’s decision will not only determine the future of food delivery charges but also set a precedent for tax parity across industries. Consumers, businesses, and policymakers alike are keenly awaiting the outcome of the meeting on December 21.
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