GST compliance burden on food delivery applications & restaurants

From January 1, 2022, Food delivery apps will primarily collect 5% GST with the government, on behalf of the restaurants, for deliveries made by these platforms. This has been proposed by the government with a motive to bring several restaurants under the GST regime.

Tax experts suggests that it will create a greater impact on smaller restaurants, with an annual turnover of less than Rs 20 lakh, as they were not required to pay GST before. But after this amendment, restaurants will also have to mandatorily register themselves under GST as is done by e-commerce sellers. Additionally, there will be an added compliance burden as they will have to keep two separate books of accounts - one for their normal business and second for the business done through these platform aggregators.

For the food aggregators, this scheme will increase the burden of compliance towards accounting and collection for the taxes on behalf of the restaurants. This will even discourage some of the restaurant to get off from their platforms.

As no new tax that has been introduced it will not impact the customers much.  They will still have to pay 5% GST to order the food online.

However, this move may also create some confusion in terms of applicability of input tax credits, for which a clarification expected from the government required by the food aggregators.