The discount coupons offered by Zomato and Swiggy would be reviewed and scanned by the tax authorities under the GST regime in January. The survey looks at coupon savings offered by meal delivery apps when paying with a certain credit card, debit card or digital wallet. In addition, the agreement established between the restaurants and the applications that serve as the basis for these discounts could be at the center of the investigation. Zomato and Swiggy will be treated the same as restaurants as of January 1, 2022. Due to this arrangement, apps such as Swiggy and Zomato may be required to pay a 5% tax on the overall cost of food.
Unlike ordering food at a restaurant, meal delivery apps, which work like e-commerce operators, offer discounts at multiple transaction points based on the use of a certain payment method, such as a checkout. debit / credit card, digital wallet, or more. Customers also get additional discounts if they order more than a certain quantity or at a certain restaurant. One of the main considerations here is whether the 5% GST should be paid on the original price or on the discounted price.
Swiggy and Zomato mostly have agreements with banks. According to insiders, this arrangement can be seen as “barter” in exchange for advertising financial services or credit cards. The Swiggy and Zomato “barter” agreements are under investigation by the tax authorities. Under the GST nothing is free and even barter is taxed.
Both companies are also concerned about the indirect tax implications of the additional costs they charge customers. Small restaurants or dhabas, in most cases, do not pay GST. If customers ordered meals from these establishments, the burden of the GST would fall on the delivery applications.
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