Food aggregators to collect 5% GST beginning Jan 1

Food aggregators like Swiggy and Zomato will have to collect and deposit tax at a 5 percent rate beginning Saturday, a move which will widen the tax base as food vendors who are currently outside the GST threshold will become liable to GST when provided through these online platforms.

Currently, restaurants registered under GST are collecting and depositing the tax. Also, cab aggregators like Uber and Ola will have to collect 5 percent Goods and Services Tax (GST) for books 2 and 3 wheeler vehicles effective January 1. Also, footwear irrespective of prices will attract a 12 percent tax from Saturday.

These are among the many changes in the GST regime that have come into effect in this new year 2022.

Also to tackle evasion, the GST law has been amended to state that the input tax credit will now be available only once the credit is appearing in GSTR 2B (purchase return) of the taxpayer. Five percent provisional credit, earlier allowed in GST rules, will not be permitted post-January 1, 2022.

EY India Tax Partner Bipin Sapra said ”this change will have an immediate impact on working capital of taxpayers who are currently availing credit of 105 percent of matched credit. The change will also mandate industry to validate that the procurements are made from genuine and compliant vendors.” The other anti-evasion measures which would come into effect from the new year include mandatory Aadhaar authentication for claiming GST refunds, blocking of the facility of GSTR-1 filing in cases where the business has not paid taxes, and filed GSTR-3B in the immediate previous month.

Currently, the law restricts the filing of returns for outward supplies or GSTR-1 in case a business fails to file GSTR-3B of the preceding two months.

While businesses file GSTR-1 of a particular month by the 11th day of the subsequent month, GSTR-3B, through which businesses pay taxes, is filed in a staggered manner between the 20th-24th day of the succeeding month.

Also, the GST law has been amended to allow GST officers to visit premises to recover tax dues without any prior show-cause notice, in cases where taxes paid in GSTR-3B is lower based on suppressed sales volume, as compared to supply details given in GSTR-1.

Sapra said while the amendment is likely to curb the malpractice of passing of input tax credit through declaring in GSTR-1 without paying taxes in GSTR 3B, genuine differences in GSTR-1 and GSTR 3B like carrying forward of unadjusted credit notes are likely to face unnecessary scrutiny.

The move is intended to curb the menace of fake billing whereby sellers would show higher sales in GSTR-1 to enable purchasers to claim an input tax credit (ITC), but report suppressed sales in GSTR-3B to lower GST liability.

Nexdigm Executive Director (Indirect Tax) Saket Patawari said e-commerce operators are now liable to pay GST in place of the restaurants and the tax base of Government may increase due to above as this operator will be liable to GST even for unregistered restaurants ”E-com operators may be asked to obtain registration in each State where restaurants are located even if they don’t have a presence and undertake all the regular GST compliances even if they don’t have any infrastructure in the State. It may become a challenge to handle audits and investigations in all the states esp. for start-ups and new E-com operators,” Patawari added.

Sapra further said that this amendment will also widen the tax base as food vendors who are currently outside the GST threshold will become liable to GST when provided through these online platforms. Thus, making procurement from these platforms costlier. ”Given that restaurants sometimes supply goods along with restaurant services, an invoice may have multiple payments by multiple people and hence would involve the complexity of operations. This practice of laying a burden on E-Commerce operators for supplies made through them is putting an additional burden on a platform which is just facilitating the supply,” Sapra added.