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GST on service supplied by restaurants through e-commerce operators

Updated on :  

08 min read.

The GST Council notified the e-Commerce Operators (ECO) to pay GST on restaurant services instead of the supplier from 1st January 2022.

GST applicability before 1st January 2022

Prior to the amendment, the tax on restaurant service supplied through ECO was paid by the supplier itself. The ECO was only required to collect TCS and file GSTR-8 against the restaurant service.

GST charge after 1st January 2022

The Central Board of Indirect Taxes vide Notification No. 17/2021 added restaurant services and cloud kitchens under the scope of section 9(5) of the CGST Act, 2017. As per this section, the e-commerce operators will be liable to pay GST at 5% on restaurant services supplied through it. So, now online food delivery applications will have to pay GST. This notification does not cover restaurant services provided at specified premises.

Clarifications provided by Circular 167/23/2021

Here are some of the clarifications provided by the circular on the representations received from taxpayers:

Are ECOs still required to collect TCS as per section 52 of the CGST Act, 2017?

No, as the ECO is now liable to pay GST on the restaurant services from 1st January 2022. They will not be required to collect TCS and file GSTR-8 on the restaurant services for which it pays GST as per section 9(5) of the CGST Act, 2017.

Are ECOs required to take separate registration for making tax payments under section 9(5)?

No. If the ECOs are already registered by Rule 8 of the CGST Rules, 2017, they are not required to take separate registration for making tax payments under section 9(5).

Is the ECO required to pay tax if the supplier of restaurant service is an unregistered entity?

Yes, even if the restaurant service supplier is an unregistered entity, the ECO will pay tax.

Are the restaurant services provided through ECO be considered for calculating the aggregate turnover of the restaurant service provider?

It will include the total value of supplies made through ECOs in its aggregate turnover calculation.

Can the restaurant service supply through ECO be considered an inward supply of ECO?

No, as the ECOs are not the recipient of restaurant service supplied through it.

Are ECOs liable to reverse proportional ITC on the input goods because ITC is not available on restaurant service?

ECOs provide their own set of services by acting as an intermediary. ECOs charge commission for providing their services. For this, ECOs require input services on which they can claim ITC. The ECO can use this ITC to pay GST on services provided by ECO on its account (let’s say to a restaurant). 
This situation will remain the same even after the ECO is liable to pay tax. Thus, ECO is not responsible for reversing proportional ITC on the input goods.

Can ECOs use ITC to pay tax on restaurant services supplied through ECO?

No, the tax liability shall be paid only in cash.

Will the supply of any goods or services other than restaurant service by the ECO be taxed at 5% without ITC?

On supplies other than restaurant service, the ECOs can continue to collect and pay GST in the same way as it was done before. Also, for any supply not covered under section 9(5), the liability to pay GST is on the supplier, and the ECO shall continue to pay TCS on such supplies.

Shall the restaurant service and any other supply of goods or services to the customer under one order be billed separately? Who is liable for raising an invoice in such a case?

In such a case, the ECO shall raise a separate invoice for restaurant service provided through it. 
For supplies other than ‘restaurant service’ through ECO, the liability to raise invoices continues with the supplier. The ECO will only be liable to collect TCS on such supplies.

How to report restaurant service, value, and tax liability in the GST return?

The ECO can continue to pay GST by uploading the details in GSTR-3B by showing them as outward taxable supplies. Also, in GSTR-1, they can report the details of restaurant service covered under section 9(5) in Table 7A(1) or Table 4A of GSTR-1.