Zomato, Swiggy and UberEats face a curious issue in GST compliance, prompting a review

Img source- indian express

April 9, 2019

Zomato, Swiggy and UberEats are facing a probing issue in goods and services tax (GST) compliance and are asking the government for a review.

These food aggregators are unable to show tax collected at source from restaurants using their platform, thereby preventing the partner restaurants from claiming credit. The government has referred the matter to a law committee under the GST Council. The industry has represented the issue… It will be examined by the law committed and will be examined by the law committee.

The problem curtails from a bar on goods and services composition dealers from registering with e-commerce platforms. This prevents food aggregators from filing TCS collected from partner eateries — that are also under the composition scheme — on the GSTN portal. However, restaurants are permitted to register with e-commerce platforms. But with their TCS not being recorded on the GSTN portal, the restaurants cannot claim credit or refund.

This particularly hits small restaurants’ cash flow and allows small businesses to opt for a fixed rate of tax — 5% in case of restaurants — on their turnover, without the tedious compliance and paperwork.

The government is now examining if a carve out needs to be created for small restaurants under the TCS regime, said the official quoted above. The GSTN is also working on the online utility to facilitate this.

The GST Council needs to take a call either to remove the requirement of TCS on restaurant services for supplies by composition dealers or provide a mechanism to allow the e-commerce operator to file a return for TCS deducted in such cases. Restaurants should be able to claim TCS credit. 

While this seems like a technical issue that can be resolved easily, from a policy standpoint, the TCS mechanism needs a relook. It’s leading to unwarranted compliance issues and preventing small businesses, particularly those supplying goods, from transacting on ecommerce platform

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