The advent of e-commerce has revolutionized the way we shop, and this includes ordering food from restaurants. With the rise of online food delivery platforms and other e-commerce operators in the food industry, the tax implications under the Goods and Services Tax (GST) regime have become an important consideration for restaurants and consumers alike. In this article, we will delve into the GST implications on restaurant services provided through e-commerce operators, and provide examples to help understand the tax treatment in different scenarios.
1-Overview of GST on Restaurant Services through E-Commerce Operators
Under the GST regime in India, restaurant services provided through e-commerce operators are subject to GST. E-commerce operators act as intermediaries between restaurants and consumers, facilitating the supply of food and other services. The GST treatment for such services depends on the type of e-commerce operator and the place of supply.
Aggregator-based Model: In this model, e-commerce operators merely act as intermediaries and do not own or supply food themselves. They only provide a platform for restaurants to list their services, and consumers directly enter into a contract with the restaurants for the supply of food. Examples of aggregator-based models include platforms like Swiggy, Zomato, and Uber Eats.
Inventory-based Model: In this model, e-commerce operators own and supply food themselves. They purchase food from restaurants and sell it to consumers under their own brand. Examples of inventory-based models include platforms like Freshmenu, Box8, and Faasos.
2- GST Treatment for Aggregator-based Model
Under the aggregator-based model, the GST treatment for restaurant services is as follows:
a. GST on Commission: E-commerce operators charge a commission or fee from restaurants for using their platform. This commission is treated as a supply of service by the e-commerce operator and is liable to GST. The rate of GST on the commission depends on the nature of the service provided and is generally 18%.
Example: Suppose a restaurant provides services worth Rs. 1,000 through an aggregator-based e-commerce operator, and the operator charges a 10% commission on the transaction. The operator will charge GST at 18% on the commission amount of Rs. 100, i.e., Rs. 18. The restaurant will then remit Rs. 82 (Rs. 100 - Rs. 18) to the e-commerce operator as the net amount payable.
b. GST on Restaurant Services: The restaurant services provided through the e-commerce operator are liable to GST separately. The rate of GST on restaurant services depends on various factors, such as the type of restaurant, location, and type of food served.
Example: Suppose the restaurant services provided through the aggregator-based e-commerce operator are liable to GST at 18%. If the value of the restaurant services is Rs. 1,000, the restaurant will charge Rs. 180 (18% of Rs. 1,000) as GST from the consumer. The restaurant will then remit Rs. 820 (Rs. 1,000 - Rs. 180) to the e-commerce operator as the net amount payable.
3- GST Treatment for Inventory-based Model
Under the inventory-based model, the GST treatment for restaurant services is as follows:
a. GST on Sale of Food: E-commerce operators who own and supply food themselves are liable to GST on the sale of food. The rate of GST on the sale of food depends on the nature of the food, such as whether it is vegetarian or non-vegetarian, and whether it is served in a restaurant or as a takeaway.
Example: Suppose an inventory-based e-commerce operator sells food worth Rs. 1,000 to a consumer, and the GST rate on the
sale of food is 5%. The operator will charge Rs. 50 (5% of Rs. 1,000) as GST from the consumer. The consumer will pay a total of Rs. 1,050 (Rs. 1,000 for food + Rs. 50 for GST) to the operator.
b. GST on Commission: Similar to the aggregator-based model, the e-commerce operator charges a commission from restaurants for using their platform. This commission is treated as a supply of service by the e-commerce operator and is liable to GST at the applicable rate.
Example: Suppose the e-commerce operator charges a commission of 10% on the sale of food, which amounts to Rs. 100. If the GST rate on the commission is 18%, the operator will charge Rs. 18 (18% of Rs. 100) as GST from the restaurant. The restaurant will then remit Rs. 82 (Rs. 100 - Rs. 18) to the e-commerce operator as the net amount payable.
c. Input Tax Credit (ITC): Restaurants that supply food to inventory-based e-commerce operators can claim input tax credit (ITC) for the GST paid on the purchase of food items used in the supply of food to the e-commerce operator. This ITC can be utilized to offset the GST liability on their own supplies of food.
Example: Suppose a restaurant purchases food items worth Rs. 500 and pays Rs. 25 (5% of Rs. 500) as GST on the purchase. The restaurant supplies these food items to an inventory-based e-commerce operator, and charges a commission of Rs. 100 on the sale. The restaurant can claim Rs. 25 as ITC and offset it against the GST liability on the commission charged from the e-commerce operator.
4- Conclusion
In conclusion, GST on restaurant services provided through e-commerce operators depends on the type of e-commerce model and the place of supply. Aggregator-based models attract GST on the commission charged by the e-commerce operator, as well as on the restaurant services separately. Inventory-based models attract GST on the sale of food, as well as on the commission charged by the e-commerce operator. Restaurants supplying food to inventory-based e-commerce operators can also claim input tax credit for the GST paid on the purchase of food items. It is essential for restaurants and e-commerce operators in the food industry to understand the GST implications and comply with the relevant tax laws to avoid any non-compliance issues in the future.
Team Taxonation
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