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Swiggy and Zomato Face Over ₹750 Crore in GST Demands: A Gig Economy Taxation Dilemma

A gig worker union reacted to the case by praising the Directorate General of GST Intelligence for bringing the topic of delivery fees to light.

What’s the News: The Directorate General of GST Intelligence (DGGI) issued a demand notice to food delivery platforms Swiggy and Zomato for non-payment of GST on the delivery fee collected from consumers, reported CNBC-TV18. The demand notice – a pre-show cause notice – alleged that Zomato failed to pay GST worth over ₹400 crore while Swiggy is accused of non-payment amounting to around ₹350 crore between July 2017 and March 2023.

Who’s responsible for these tax payments? The government is arguing that food delivery is a service and thus platforms providing these services must pay a GST at an 18 per cent rate aside from the 5 per cent GST paid on food orders (and not restaurants). Meanwhile, Zomato and Swiggy say they do not keep the collected fee but rather pass it on to gig workers hired on a per-delivery basis, and thus the gig workers who provide the service should pay the GST. However, they too are exempt from GST since each worker is below the Rs. 20 lakh threshold.

As such, this case brings to the spotlight some interesting questions like: Should aggregator companies be exempt from such service taxes altogether? What does this mean for certain gig workers’ demands like their persistent ask for regularisation? Will they be held liable for the service tax in such situations? Should there be a change in how taxes are levied on online platforms?

Economic Times on November 24 reported that the companies intend to reach out to the tax authorities and explain their situation. As a senior government official told the news outlet, the issue could have wider implications for other companies that collect delivery or similar fees from users as well.

Gig workers praise the DGGI notice: In a recent tweet, the Telangana Gig and Platform Workers Union (TGPWU) praised the demand notices sent to the platforms. The tweet also came with a statement from the gig workers to the investors of Swiggy and other companies.

In it, the gig workers talked about the valuation crunch faced by Swiggy following the devaluation of stakes by US companies like Baron Capital and Invesco. The union appealed to such investors to consider gig workers as essential stakeholders, reassess the social contribution of investments made to the companies and consider the grievances raised by gig workers in the past which includes the insufficient wages paid to the workers.

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Swiggy, Zomato already absorbed tax load from restaurant services

In 2021, the GST Council recommended that food delivery apps should be taxed instead of the restaurants that prepare and pack the food. The suggestion raised some questions about its practical execution since some well-established restaurants may have already been paying taxes on the food they distributed via the aggregators.

Since the mid-2010s, there has been a significant growth in the taxation of digital services in India. As per previous MediaNama reports, a blanket service tax of 15 per cent was levied on practically all digital products from apps to content subscriptions to e-books in December 2016, which was later levied as GST, under the 18% slab.

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Written By

I'm interested in the shaping and strengthening of rights in the digital space. I cover cybersecurity, platform regulation, gig worker economy. In my free time, I'm either binge-watching an anime or off on a hike.

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