GST on Online Food Delivery in India (2025): Latest Tax Updates, Rules & Impact on Swiggy, Zomato, and Restaurants

1. GST on Food Delivered

Initially, restaurants supplying food through online platforms were responsible for collecting and remitting GST. However, effective January 1, 2022, the GST Council amended this approach. Under Notification No. 17/2021, food delivery e-commerce operators (ECOs) like Swiggy and Zomato are now liable to collect and remit GST on behalf of the restaurants for orders placed through their platforms. This change aims to curb tax evasion and streamline tax collection processes.

• GST Rate: The applicable GST rate on restaurant services provided through ECOs is 5%, with no entitlement to Input Tax Credit (ITC).

2. GST on Delivery Charges

A contentious issue has been the GST applicable to delivery or convenience fees charged by these platforms. Historically, an 18% GST rate has been levied on these delivery charges, as they are categorized under service fees. This rate has been a point of debate, leading to significant legal and financial implications for the platforms involved.

Case Study: Zomato’s GST Dispute

In December 2024, Zomato received a tax demand notice amounting to ₹803 crore from the GST department. This demand comprised ₹401.7 crore in alleged unpaid taxes on delivery charges for the period between October 2019 and March 2022, with an equivalent amount imposed as a penalty. The core of the dispute lies in whether the delivery charges collected by Zomato should attract GST, considering that these charges are passed on to delivery partners. Zomato contends that it merely acts as an intermediary, facilitating transactions between customers and delivery personnel, and thus should not be liable for GST on these charges. The company has announced plans to appeal the order, asserting a strong legal position supported by external advisors.

Reuters

Proposed Changes: Reduction in GST Rates

In response to industry feedback and ongoing disputes, the GST Council is considering a proposal to reduce the GST rate on delivery charges from 18% to 5%. This potential adjustment, expected to take effect from January 1, 2025, aims to harmonize the tax structure and alleviate the financial burden on consumers. However, under this proposal, platforms would not be eligible to claim Input Tax Credit (ITC) on these services.

The Economic Times

Implications for Stakeholders

A. Consumers

• Cost Reduction: A decrease in GST on delivery charges is anticipated to lower the overall cost of food delivery services, making them more affordable for consumers.

B. Food Delivery Platforms (Swiggy and Zomato)

• Compliance Adjustments: Platforms will need to update their billing systems to reflect the revised GST rates and ensure accurate tax collection and remittance.
• Financial Impact: The inability to claim ITC may affect the profitability of these platforms, as they would bear the input taxes on services utilized.

C. Government

• Revenue Considerations: While the reduced GST rate may lead to a decrease in tax revenue from delivery charges, it could be offset by increased compliance and a broader tax base.

Compliance Guidelines for Restaurants and Delivery Platforms

• Registration: All restaurants partnering with ECOs must ensure GST registration, irrespective of their turnover, due to the mandatory tax collection by the platforms.
• Invoicing: ECOs are responsible for issuing invoices to customers for the supply of restaurant services, including applicable GST.
• Tax Remittance: Platforms must remit the collected GST to the government within the stipulated timelines to avoid penalties.
• Record-Keeping: Maintaining detailed records of all transactions, including delivery charges and corresponding GST payments, is essential for compliance and audit purposes.

Conclusion

The GST landscape for online food delivery services in India is undergoing significant changes aimed at simplifying tax structures and enhancing compliance. Stakeholders, including consumers, platforms like Swiggy and Zomato, and partnering restaurants, must stay informed about these developments to navigate the evolving regulatory environment effectively. Proactive adaptation to these changes will be crucial in ensuring compliance and optimizing operational efficiency in the dynamic online food delivery market.