GST officials discuss Swiggy, Zomato taxation

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State and central government goods and services tax (GST) officials, who constitute the fitment committee, have reviewed whether delivery charges levied by food delivery companies like Swiggy and Zomato should continue to be taxed.

The reason for the review is the Directorate General of GST Intelligence (DGGI) notice of last year questioning the classification of delivery charges. The DGGI argued that delivery charges, when bundled with food supplies, should be treated as part of the food supply and taxed at a higher GST rate of 18 per cent. 

The Directorate General of GST Intelligence (DGGI) issued notices to Zomato and Swiggy regarding GST demands for the period between July 2017 and March 2023. Zomato received a Rs 400 crore demand, while Swiggy was asked to pay up Rs 350 crore.  

These notices were part of an investigation into the classification of food delivery services and their GST obligations

Under the Central Goods and Services Tax (CGST) Act, 2017, Section 7(1)(a) provides that the supply of goods and services includes all forms of transactions, which could be construed to include food delivery charges as part of the service.

However, there is ambiguity in the law regarding how such services should be classified, and the industry has raised concerns that this interpretation could lead to an unfair tax burden. The fitment committee’s role is advisory, and while it cannot overturn the DGGI’s notice, it is tasked with reviewing such matters and suggesting policy changes.

As per tax officials, Section 9 of the CGST Act stipulates the levy of GST on supply of goods and services, and while delivery charges are often considered incidental to the food delivery, the taxability of these charges under the same classification as food supplies needs further scrutiny. The Committee may recommend a clarification to avoid ambiguity and provide a fair framework for businesses and consumers, which then will be taken up for review by the council. 

However, there is no clarity if the 55th GST Council tasked to meet on December 21 in Jaisalmer, Rajasthan will take this up.


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