Understanding the Proposed GST on Food Delivery Apps in India

Introduction

The Indian government, represented by the Ministry of Finance, recently responded to an inquiry in the Rajya Sabha regarding the proposed 5% Goods and Services Tax (GST) on food delivery applications such as Zomato and Swiggy. This response provides insights into the GST framework applicable to food services and clarifies the government's current stance on further taxation.

GST Framework for Food Delivery Apps

The rate and exemptions for GST are established by the GST Council, which comprises representatives from both the central and state/union territory governments. Currently, restaurant services, except for those located in specified premises, attract a 5% GST sans input tax credit. This tax provision applies whether the food service is rendered directly by the restaurant or via Electronic Commerce Operators (ECOs), such as Zomato and Swiggy. Therefore, a 5% GST is already embedded in the core food service.

Clarification on GST Applicability

During the 55th GST Council meeting held on December 21, 2024, a proposal was tabled to clarify GST rates on food delivery services ordered through these applications. However, the council decided that additional scrutiny was necessary before reaching a conclusion. Furthermore, other services offered by food delivery apps, including platform services, are subject to an 18% GST.

Financial Implications for Consumers

The inquiry also addressed the potential financial burden on consumers due to the 5% GST. The Minister of State in the Ministry of Finance stated that a definitive answer on this matter cannot be provided, as the council has not finalized the application of the 5% GST on food delivery apps. Consequently, the financial impact on consumers remains uncertain until the GST Council completes its evaluation and renders a conclusive decision.

Conclusion

The GST Council's review is ongoing to determine whether food delivery app platforms will also incur a 5% tax, in addition to the existing tax on food services. At this stage, there is no timeline established for when the GST Council will revisit this issue. For now, the current policy imposes the 5% tax on restaurant food services, and the implications for delivery applications remain under discussion.