Food delivery apps like Zomato and Swiggy will collect five per cent GST, or Goods and Services Tax, from consumers instead of the restaurant they pick up orders from, Finance Minister Nirmala Sitharaman said Friday evening after a meeting of the GST Council in Lucknow.
At present these apps are registered as TCS, or Tax Collected at Source, in GST records.
Speaking to reporters after the GST meeting, Revenue Secretary Tarun Bajaj clarified that no new taxes were being announced, and that the GST collection point was simply being transferred.
"Suppose you order food from the aggregator... now the restaurant is paying taxes. But we found some restaurants were not paying. We are now saying that if you order the aggregator will collect from the consumer and pay to the authorities instead of the restaurant doing this..." he said.
"There is no new tax..." Mr Bajaj added.
He explained that analysis of some returns implied tax evasion on the part of some restaurants.
Analysis - of returns filed by delivery apps and some Haryana restaurant services - showed the gap in taxable turnover for suppliers where TCS was deducted by a delivery app was greater than turnover declared by such suppliers.
The evasion amount is believed to be substantial as food delivery apps have high supply volumes.
Among other major decisions announced by the powerful GST Council on Friday was that petrol and diesel would not, at this time, be brought under the GST regime.
Ms Sitharaman said the Council had discussed this in the light of a recent Kerala High Court order and concluded "it was not the right time to bring petroleum products under the GST".
The minister also said that GST on bio-diesel - which oil marketing companies use to blend with diesel - had been reduced from 12 to five per cent.
The Council also extended concessional GST rates on drugs used in COVID-19 treatment till December 31, and exempted certain other medicines, including those used in the treatment of muscular atrophy (and single doses of which cost crores of rupees).
GST on drugs used for cancer treatment were also reduced - Keytruda (the brand name for Pembrolizumab), for example, will now invite only five per cent GST compared to 12 earlier.