GST on Restaurant Services provided through E-commerce Operators

Posted On December 18, 2021

The GST Council suggested notifying “Restaurant Service” under section 9(5) of the CGST Act, 2017 during its 45th meeting on September 17, 2021. As a result, the e-commerce operator is responsible for paying the tax on supplies of restaurant services provided through e-commerce operators. Notification No. 17/2021, dated November 18, 2021, has been issued in this regard.

In plain terms, as per section 9(5) of the Central Goods and Services Tax Act 2017, E-commerce operators are obligated to pay GST on certain specified services delivered through their platform as if they were the tax-paying supplier of such services. E-commerce operators are people who own, operate, or manage a digital or electronic facility or platform for the supply of goods, services, or both over a digital or electronic network, comprising digital products.

“The Central Board of Indirect Taxes and Customs has issued a circular No. 167/23/2021 dt. 17/12 2021 regarding the compliance of GST laws in respect of supply of Restaurant service through e-commerce operators”

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 The following services are included under section 9(5) of the GST Act 2017:

• Transporting passengers by radio-taxi, motor cab, maxi cab, motorcycle, omnibus, or other motor vehicle (Notification No. 17/2017-Central Tax (Rate) issued June 28, 2017 and Notification No. 17/2021-Central Tax (Rate) on November 18, 2021.)

‘Radio taxi’ refers to any taxi, including a radio taxi, that is in two-way radio communication with a central control office and can be monitored via GPS or the General Packet Radio Service (GPRS).

The terms’ maxi cab, motor cab, motor bike, motor vehicle, and omnibus’ have the same definitions as in clauses (22), (25), (27), (28) and (29) of Section 2 of the Motor Vehicle Act, 1988. (59 of 1988).

• Accommodation in hotels, inns, guest houses, clubs, camping sites, or other commercial areas intended for residential or accommodation purposes, except where the person supplying such service through an e- commerce operator is liable for registration under section 22(1) of the said Central Goods and Services Tax Act 2017. (Central Tax (Rate) Notification No. 17/2017, issued June 28, 2017)
• Housekeeping services, such as plumbing and carpentry, are exempt from registration under section 22 of the said Central Goods and Services Tax Act, unless the person providing such service through an electronic commerce operator is required to register under sub-section (1) of section 22 of the said Central Goods and Services Tax Act. (Central Tax (Rate) Notification No. 23/2017, issued August 22, 2017)

Restaurant Service:

With Notification No. 17/2021-Central Tax (Rate) dated November 18, 2021, the Central Government has now placed restaurant services within the scope of section 9(5) of the Central Goods and Services Tax Act 2017.

• Other than services provided by restaurants, eating joints, and other establishments established in specific locations, offering restaurant services.

‘Specified premises’ are those that provide hotel accommodation services and have a declared rate of more than Rs. 7,500 per unit per day or equivalent.

‘Restaurant service’ refers to the provision of goods, such as food or other article for human consumption or any drink, by a restaurant, eating joint, mess, or food court, whether for consumption on or off the premises where such food or any other item for human consumption or drink is offered. (Central Tax (Rate) Notification No. 20/2019, issued September 30, 2019)

From January 1, 2022, the notification will take effect.

According to the aforementioned notice, food tech businesses like as Zomato, Swiggy, Uber Eats, and others will be obliged to pay GST on restaurant service provided through their platforms as if they were the supplier of such services. Restaurants are exempt from charging GST in these situations.

Exception: The aforementioned rule does not apply to restaurant services supplied by restaurants, dining joints, and other establishments located on the premises of a hotel that has a declared tariff of Rs. 7,500 per unit per day or equivalent for any unit of lodging.

GST rate: The GST rate for restaurant services is 5% with no input tax credit.

Implications

For food-tech firms,

• Food tech companies would also have to pay GST on the food they sell on their platform.
• Increased compliance costs.
• TCS is not required to be collected on funds remitted to restaurants unless such funds are subject to GST.

Restaurants, eating establishments, such as mess and cafeterias

Restaurants will not be accountable for GST on foods purchased through e-commerce platforms. But they will be liable for GST on foods served in restaurants, takeaways, and outdoor catering.

Restaurants would be required to register for GST only if their revenue exceeds the minimal level of Rs. 20/10 lakhs.

If restaurants are part of a hotel providing room services with disclosed tariffs exceeding Rs. 7,500 per unit per day, restaurants will be liable for GST, not food tech businesses.

 For cloud kitchens

This will also provide complete relief to cloud kitchens that rely solely on e-commerce platforms to operate. Even if their turnover exceeds the minimal threshold level of Rs. 20/10 lakhs, cloud kitchens will not be needed to register for GST.