Zomato, Swiggy hit with GST demand notice, face tax troubles: Report  

India's Directorate General of GST Intelligence (DGGI) has issued demand notices to leading food delivery platforms Zomato and Swiggy, alleging non-payment of GST on delivery fees collected from consumers, CNBC-TV18 reported on Wednesday.

The notice, worth over 750 crore rupees ($90 million), comes after the Pune zone of DGGI initiated an investigation into the period from July 2017 to March 2023. The DGGI contends that, as food delivery is a service, Zomato and Swiggy are liable to pay GST at an 18 per cent rate, the report said.

The industry, however, has a different perspective. It considers Zomato and Swiggy as platforms that hire gig workers on a per-delivery basis. According to the industry, since each gig worker falls below the 20 lakh rupees threshold, they are exempt from GST. Currently, food delivery platforms are required to pay 5 per cent GST on food orders. Besides the food bill, they also collect charges for delivery, which are passed on to gig workers.

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Experts anticipate that both Zomato and Swiggy will contest the demand. An ideal solution suggested for the GST Council is to make a prospective change, mandating food platforms to pay GST on these charges (similar to the food bill) at 5 per cent. However, the decision is pending. The lack of clarity on this issue has led to confusion and litigation in various cases.

Speaking to CNBC-TV18, Saurabh Agarwal, a partner at EY, emphasised the ongoing debate on the taxation of delivery charges and the need for clear guidelines from the GST Council. Industry experts hope for clarity, given similar views by authorities in other cases, leading to confusion and litigation. The real question at hand is whether the service is considered to be provided directly by the platform or by the delivery personnel.

The tax authorities' contention that food delivery platforms are required to pay GST on these charges has sparked debate, with experts highlighting the potential impact on the cash flow of these platforms. Clarity and guidelines from the GST Council are deemed essential to address the ongoing controversy surrounding the taxation of delivery charges.

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