State and central government goods and services tax (GST) officials, part of the fitment committee, are currently reviewing the taxation of delivery charges imposed by food delivery services like Swiggy and Zomato.
This review follows a notice from the Directorate General of GST Intelligence (DGGI) issued last year, which questioned the classification of delivery charges. The DGGI contended that when delivery charges are included with food supplies, they should be classified as part of the food supply itself and therefore taxed at a higher GST rate of 18 percent.
The DGGI has sent notices to Zomato and Swiggy regarding GST demands covering the period from July 2017 to March 2023, amounting to Rs 400 crore for Zomato and Rs 350 crore for Swiggy.
These notices stem from an ongoing investigation into how food delivery services should be classified and their respective GST responsibilities.
Under Section 7(1)(a) of the Central Goods and Services Tax (CGST) Act, 2017, the supply of goods and services encompasses all types of transactions, which could imply that food delivery charges fall under the service category.
However, there exists ambiguity within the law regarding the classification of such services, which has raised concerns in the industry about the potential for an unequal tax burden. Although the fitment committee provides advisory support and cannot overturn the DGGI’s notice, it is responsible for examining these issues and proposing changes to policy.
Tax officials have noted that Section 9 of the CGST Act mandates the imposition of GST on supplies of goods and services. While delivery charges are generally seen as incidental to food delivery, the need for further investigation into their tax classification alongside food supplies is essential. The committee may suggest clarifications to eliminate ambiguity and establish a fair framework for both businesses and consumers, which will subsequently be reviewed by the council.
However, it remains unclear whether the 55th GST Council, scheduled to meet on December 21 in Jaisalmer, Rajasthan, will address this matter.