State and central GST officials, forming the fitment committee, are reviewing the tax treatment of delivery charges levied by food delivery platforms like Swiggy and Zomato. This review follows a notice from the Directorate General of GST Intelligence (DGGI), which questioned the classification of delivery charges and their applicable GST rate.
The DGGI, in its 2022 notice, argued that delivery charges bundled with food supplies should be treated as part of the food supply, attracting a higher GST rate of 18%. Zomato and Swiggy have been issued GST demand notices for the period between July 2017 and March 2023. The notices amount to ₹400 crore for Zomato and ₹350 crore for Swiggy, sparking a debate on how such charges should be classified under the GST regime.
Legal Ambiguity in GST Classification
Under Section 7(1)(a) of the Central Goods and Services Tax (CGST) Act, 2017, the supply of goods and services includes all transactions, potentially including food delivery charges as part of the service. However, industry stakeholders argue that this interpretation imposes an unfair tax burden on businesses and consumers.
Tax officials cite Section 9 of the CGST Act, which mandates GST on the supply of goods and services, noting that delivery charges are often considered incidental to food delivery. However, the ambiguity over whether they should be classified alongside food supplies persists.
Advisory Role of the Fitment Committee
While the fitment committee cannot overturn the DGGI’s notices, it is tasked with advising on policy changes to address such classification issues. A clarification from the committee could provide a consistent tax framework for businesses and consumers. The matter may be escalated to the GST Council for a final decision.
55th GST Council Meeting: Will It Address This Issue?
The next GST Council meeting, scheduled for December 21 in Jaisalmer, Rajasthan, may provide clarity on the issue. However, it remains uncertain whether this specific matter will be included in the agenda.
The outcome of this review could significantly impact food delivery platforms, the taxation framework, and the cost structure for end consumers.
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