Food delivery giants, Zomato and Swiggy are reportedly facing new tax challenges, with notices issued for a combined Goods and Services Tax (GST) amounting to Rs 1,000 Crore. Tax authorities now consider the delivery charges collected by these platforms as part of their revenue.
Both food delivery platforms have been instructed to pay Rs 500 Crore each, representing 18 per cent tax on the total amount collected as delivery fees since the inception of their food delivery services, according to sources familiar with the matter as reported by the Economic Times.
It's noteworthy that in January 2022, the Centre included 'restaurant services' and cloud kitchens under Section 9(5) of the CGST Act, 2017, requiring platforms like Swiggy and Zomato to pay 5 per cent GST on the 'restaurant services' they provide.
However, it remained unclear whether delivery services and the associated fees would also be subject to taxation.
A senior executive at a food-delivery platform emphasised that the delivery fee is not their revenue but goes directly to the rider, citing an interpretation of guidelines with approval from tax consultants.
The executive also asserted that the platform consistently maintains that riders are contractors, not employees. Nevertheless, the government contends that the riders collect money on the platform's behalf, considering it revenue for the company.
Nishtha Anushree is Senior Sub-editor at Swarajya. She tweets at @nishthaanushree.
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