The Goods and Services Tax (GST) department has launched an investigation into whether restaurants have evaded taxes on packaging charges collected from customers. This move comes in the wake of previous GST recovery efforts focused on food and delivery charges.
According to a report by the Economic Times, several restaurants listed on popular food aggregator platforms such as Zomato have received summons from the GST authorities over the past few months. The summons seek detailed records of GST paid on packaging charges since January 1, 2022.
Key Focus: GST on Packaging Charges
The core issue under scrutiny is whether the GST collected on packaging charges by restaurants has actually been deposited with the government. Under GST rules, businesses are required to collect tax from customers and remit it to the government, covering all components of a transaction — including food, delivery, and packaging.
Who Should Pay the GST: Restaurant or Platform?
There is an ongoing dispute over who is responsible for paying the GST on packaging charges — the restaurant or the online delivery platform.
Food delivery apps argue that packaging is a distinct supply, which makes restaurants solely liable for paying GST on these charges. Dinesh Agrawal, co-head of indirect tax at Khaitan & Co, told Economic Times that delivery platforms believe they are not responsible for these specific taxes.
On the other hand, tax experts believe that if packaging charges are separately mentioned on the invoice, they constitute an independent supply and must be taxed in the hands of the restaurant. Ashish Karundia, founder of Ashish Karundia & Co, stated that restaurants are liable to charge and remit GST when packaging charges are billed separately.
What This Means for the Food Industry
This probe signals increased regulatory attention towards compliance in the food delivery ecosystem. With the rising popularity of online food orders, the tax treatment of ancillary charges like packaging is under the microscope. Both restaurants and food aggregators may need to reassess their billing and tax practices to ensure GST compliance.
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