Online food delivery platforms Zomato and Swiggy hit a stumbling block as the Income-tax department called upon them for scrutiny under the Goods and Services Tax (GST) regime beginning January 2022.
The whole matter of the probe is about the discount coupons offered by the food delivery applications on using a particular credit card, debit card or digital wallets as the mode of payments.
Other than that, the arrangements found between restaurants and the applications, which form the base of these discounts is also a matter of concern for the tax department. From January 1st,2022, Swiggy and Zomato would be regarded as equal to the restaurants. Account of which implies that the food delivery apps would now have to pay around 5% tax on the total cost of food.
What is the matter around these delivery platforms?
Swiggy and Zomato are alleged to be associated with banks for the promotion of banking services or credit cards. Hence, the tax department is scrutinizing whether agreements between Swiggy and Zomato and whether it should come under GST. Tax experts highlighted that similar discounts are also offered if customers order above a particular threshold amount or from a particular restaurant. Even in situations where discounts are not offered, tax experts say that there is also a complication around the amount on which GST must be paid.
But the catch is that, in most cases, Dhabbas or small restaurants are not obliged to pay taxes. So in such cases where the customer is ordering from such places, the burden of GST will fall over the delivery platforms. Earlier, these apps were also asked to switch to electric vehicles by the Delhi government to reduce the air pollution levels in the city.
Swiggy was founded in 2014. Although a late entrant the startup was set up as a food delivery platform from the beginning itself. Swiggy entered the unicorn club the same year as Zomato in 2018. Over the years the company has successfully raised over $2.9 billion in funding.