wordpress blog stats
Connect with us

Hi, what are you looking for?

Swiggy and Zomato to absorb tax load carried by restaurants under new GST structure

In India, the taxation of digital services has grown with the explosion of internet access since the mid-2010s.

The Goods and Services Tax Council on September 17 recommended that food delivery apps like Swiggy and Zomato should be taxed instead of the restaurants that prepare and pack the food. The council also recommended that cab aggregators like Uber and Ola should be taxed:

E Commerce Operators are being made liable to pay tax on following services provided through them

  1. transport of passengers, by any type of motor vehicles through it [w.e.f. 1st January, 2022]
  2. restaurant services provided through it with some exceptions [w.e.f. 1st January, 2022] — GST Council press release

The move would essentially shift the burden of taxation from restaurants to the delivery company. It’s not clear how this would work in practice, though, as depending on how formally established a restaurant is, it may already be paying taxes on food it is distributing through aggregators. Will such restaurants uniformly reduce prices, or will they pocket the extra revenue and charge differentially on online platforms? We’ll find out starting January. The taxation of Uber and Ola is also going to be interesting to follow — as Inc42 reported, this tax is currently only charged on the part of the ride fare that goes to the company, and not to the driver. If the tax grows wider and potentially requires drivers to start paying out from their incomes, that could drive ridesharing prices up in India.

Digital taxation in India

In India, taxation of digital services has grown with the explosion of internet access since the mid-2010s. A blanket service tax of 15% was levied on practically all digital products from apps to content subscriptions to e-books in December 2016. This tax is now levied as GST, under the 18% slab. The digital services industry, largely untaxed in India beforehand, has silently complied for the most part.

But a much smaller levy than this caused much consternation: an “Equalisation Levy” of 2% was announced by the Indian government, targeting only foreign sellers. Companies like Netflix and Google would have to pay 2% on their incomes from India as a levy, in a supposed bid to level the playing field, and chipping away at companies’ already low per-user revenue in the country.

The US government got involved. The United States Trade Representative launched an investigation, where India defended the levy, and eventually published a report saying that the tax was discriminating against American businesses. Lobby groups representing American tech companies protested, asking for the changes to be pushed back. The US announced and suspended retaliatory tariffs simultaneously, reasoning that it would continue pursuing the matter in the G20 and the OECD.

Also read

Advertisement. Scroll to continue reading.

Have something to add? Post your comment and gift someone a MediaNama subscription.

Written By

I cover the digital content ecosystem and telecom for MediaNama.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

Views

News

The US and other countries' retreat from a laissez-faire approach to regulating markets presents India with a rare opportunity.

News

When news that Walmart would soon accept cryptocurrency turned out to be fake, it also became a teachable moment.

News

The DSCI's guidelines are patient-centric and act as a data privacy roadmap for healthcare service providers.

News

In this excerpt from the book, the authors focus on personal data and autocracies. One in particular – Russia.  Autocracies always prioritize information control...

News

By Jai Vipra, Senior Resident Fellow at Vidhi Centre for Legal Policy The use of new technology, including facial recognition technology (FRT) by police...

You May Also Like

Advert

135 job openings in over 60 companies are listed at our free Digital and Mobile Job Board: If you’re looking for a job, or...

News

Rajesh Kumar* doesn’t have many enemies in life. But, Uber, for which he drives a cab everyday, is starting to look like one, he...

News

By Aroon Deep and Aditya Chunduru You’re reading it here first: Twitter has complied with government requests to censor 52 tweets that mostly criticised...

News

Google has released a Google Travel Trends Report which states that branded budget hotel search queries grew 179% year over year (YOY) in India, in...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to our daily newsletter
Name:*
Your email address:*
*
Please enter all required fields Click to hide
Correct invalid entries Click to hide

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ