As the festive season kicks in, e-commerce and food delivery platforms are gearing up to increase delivery charges. With the new GST rates coming into effect from September 22, customers will soon have to pay more for their orders. According to the decision taken by the Goods and Services Tax (GST) Council in its 56th meeting held on Wednesday, these platforms will levy 18% GST on delivery charges starting September 22.
As far as we know, the new decision has now cleared up old confusion about how these services should be taxed, which will also help reduce legal disputes. However, for the customers ordering from these apps will become more expensive.
How Much Extra Will You Have To Pay?
Food delivery apps will now add 18% GST on delivery charges, along with 5% GST charge on restaurant services. Earlier, only 5% GST was charged on restaurant services and platform charges. Until now, quick commerce apps only had to pay GST on handling charges.
E-commerce Operators (ECOs) And The Law
Food delivery through e-commerce operators (ECOs) is divided into two parts: Restaurant Services and Delivery Services. Currently, restaurant services supplied through these apps are taxed at 5% GST, without any input tax credit. From January 1, 2022, restaurant services supplied through ECOs were brought under section 9(5) of the CGST Act, 2017, following the recommendations of the 45th GST Council meeting held in September 2021. However, the tax rules for delivery services related to these restaurant orders were not clearly specified earlier.
Will Pass On To The Customers
With the 18% GST coming into effect on food delivery platforms, companies are likely to pass the additional cost on to consumers. The industry estimates this GST impact to be over Rs 300 crore, which experts believe will ultimately be borne by the customers.
