As 2022 arrives, new GST norms hit ecommerce operators

A question that could be troubling many customers right now is, “Would that biryani one likes ordering on Swiggy/Zomato/other ecommerce operators become costlier from January 1, 2022?”

The question arises because the Central Board of Indirect Taxes and Customs (CBIC) has now shifted the responsibility of paying GST on all restaurant services through ecommerce operators (ECOs) from restaurants to operators. Since only the responsibility to pay the tax has shifted and not the rate, Thalassery Biryani should cost the customer the same Rs 169 in 2021 as well as 2022. The only possibility of food costing more would be when ECOs increase their delivery charges (this could well be ruled out for the present considering the competition in the sector).

Ecommerce operators

CBIC has come out with a notification as well as responses to 11 questions to provide clarity on what the ECOs should do. Since the restaurant service has been notified under Section 9(5) of the CGST Act, ECOs will need to pay GST with effect from the new year. Accordingly, they would no longer be required to collect tax at source (TCS) and file a separate return in respect of restaurant services on which they pay tax in terms of section 9(5).

On other goods or services supplied through the operators, which are not notified u/s 9(5), operators would continue to pay TCS in terms of section 52 of CGST Act, 2017 in the same manner as at present.

Also read: Your Swiggy, Zomato orders may be costlier this year; food aggregators to collect 5 per cent GST beginning January 1

As ECOs are already registered in accordance with the CGST Rules, 2017, as suppliers of their own goods or services, there would be no mandatory requirement of taking separate registration by them for payment of tax on restaurant service under section 9(5) of the CGST Act, 2017.

ECOs will be liable to pay GST on any restaurant service supplied through them including by an unregistered person. CBIC has clarified that the aggregate turnover of persons supplying restaurant service through these operators shall be computed as defined in section 2(6) of the CGST Act, 2017 and shall include the aggregate value of supplies made by the restaurant through ECOs.

Accordingly, for threshold consideration or any other purpose under GST laws, the person providing restaurant service through ECOs shall account for such services in his aggregate turnover.

Operators are not the recipient of restaurant service supplied through them. Since these are not input services to them, these are not to be reported as inward supply (liable to reverse charge). In some cases, ECOs provide their own services as an electronic platform and act as an intermediary, for which they would acquire inputs/input service on which they avail input tax credit (ITC). For these services, ECOs charge commission or fees for the services they provide which is utilised by them for payment of GST on services provided on their own account.

The situation in this regard remains unchanged even after ECOs have been made liable to pay tax on restaurant service.

CBIC has clarified that ECOs shall not be required to reverse ITC on account of restaurant services on which they pay GST in terms of section 9(5) of the Act. An important clarification given by CBIC is that on restaurant service, ECOs shall pay the entire GST liability in cash and no ITC can be utilised for payment of GST on restaurant service supplied through ECOs.

On such supplies (other than restaurant services made through ECOs) GST will continue to be billed, collected and deposited in the same manner as is being done at present (ECOs will deposit TCS on such supplies).

Considering that liability to pay GST on supplies other than ‘restaurant service’ through the ECOs, and other compliances under the Act, including the issuance of invoice to customers, continues to lie with the respective suppliers (and ECOs being liable only to collect TCS on such supplies), it is advisable that ECOs raise a separate bill on restaurant service in such cases where they provide other supplies to a customer under the same order.

Rate increases

While customers can rejoice over the fact that restaurant services may not pinch their pockets further, they have other reasons to worry. Effective the new year, the GST rate on fabrics will be raised to 12 per cent from 5 per cent, and for garments of any value, it has been raised to 12 per cent, compared to the previous rate of 5 per cent on items priced up to Rs 1,000. Textiles (including woven fabrics, synthetic yarn, pile fabrics, blankets, tents, accessories such as tablecloths or serviettes, rugs and tapestries) have also seen their rates raised from 5 per cent to 12 per cent, while footwear of any value has seen its rate raised from 5 per cent (up to Rs 1,000/pair) to 12 per cent.

The GST Council is scheduled to meet to take a relook at the rates (there is news floating around that the tax rates could be increased by a percentage point). Customers can only hope that this is not true since there seems to be some light at the end of the pandemic tunnel that everyone has been through over the past couple of years (fingers crossed on the impact that Omicron and other new variants could have). If anything, GST rate changes need to consider a host of factors and should not be done on an ad-hoc basis.

As has been the case since 2017, GST laws have given customers cause to be reasonably happy for the present but there is always some cause for concern as to what could happen in the future.

(The writer is a Bengaluru-based tax expert)

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