GST on Handling & Rain Fees: Is It Legal for Quick Commerce Platforms?

Quick commerce platforms have become an everyday convenience, delivering essentials within minutes. Nowadays, these platforms have started charging their customers additional fees such as handling fees, rain fees, or platform fees. 

This article will explore what these additional fees are, whether platforms can legally levy them, and whether GST applies to such charges.

Key Takeaways

• Quick commerce platforms can legally levy handling or rain fees, but these attract 18% GST.
• Lack of upfront disclosure of such fees may amount to unfair trade practices or dark patterns.
• Consumers must be informed of all charges before checkout and can report violations to the National Consumer Helpline at 1915 or 1800-11-4000.

What are "Handling Fees" and "Rain Fees" in Quick Commerce?

Handling fees are extra charges added by quick commerce platforms over and above delivery charges. Platforms usually recover costs by charging for the careful handling of fragile items or a small fee for small-value orders.

Rain fees are typically charged to compensate delivery partners for working in difficult rainy conditions. Besides these, users may also see surge fees when the platform experiences high demand during peak hours.

Legal Framework: GST on Extra Charges

Under Section 9(5) of the Central GST Act, when specific services are provided through an e-commerce platform, the platform is responsible for collecting and paying GST. Also, the GST department recently clarified that the delivery fee (whether including rain fee or handling fee, or not) will be subject to 18% GST. This increases the overall cost to the consumer.

Compliance with Consumer Protection Laws

Most platforms disclose to their users any additional fees that will be charged at checkout. The problem typically arises when customers are not told about these charges and when they appear only at checkout, a practice known as drip pricing and dark patterns.

Drip pricing occurs when additional costs like handling or platform fees are revealed only at the final payment stage. Dark patterns include practices such as automatically adding charges, like donations, without the user's consent or forcing the user to accept extra fees, e.g., not allowing checkout unless additional fees are accepted.

If any platforms add handling or rain fees without clear prior disclosure, these can be considered dark patterns and unfair trade practices.

Why Platforms Charge GST on These Fees?

When any GST-registered entity provides services, they are liable to charge GST in addition to their base consideration. These platforms offer various services and platform fees, delivery fees, and other fees are charged as consideration. Accordingly, the platform is required to collect GST on fees charged to its customers at 18%.

Platform Practices: What the Big Players Are Doing

Each e-commerce platform has its own version of platform fees. For instance, Zepto or Blinkit charges handling fees. During harsh weather conditions, rain fees are applied, and when heavy traffic is observed on the platform, surge fees are also applied. 

Due to dynamic pricing on these platforms, pricing differences are also observed depending on the city, time of order, and demand.

Consumer Rights & Remedies

Consumers have the right to know the complete price of any product or service before purchase, including all platform charges and applicable taxes. Any dark patterns or drip-pricing practices will violate consumers' rights.

In case of any complaints on these e-commerce platforms, a consumer can reach out to the National Consumer Helpline at 1915 or 1800-11-4000, visit consumerhelpline.gov.in, or download the NCH App to file a complaint with relevant screenshots.