Food delivery firms liable to collect GST3 min read . Updated: 17 Sep 2021, 11:51 PM IST
- Council offers tax concessions on more than a dozen medicines
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New Delhi: Federal indirect tax body, the Goods and Services Tax (GST) Council, on Friday decided to offer tax concessions on more than a dozen drugs, resolve tax anomalies on items such as footwear and textiles and make e-commerce companies in transport and food delivery sectors liable to collect taxes on behalf of drivers and eateries.
Finance minister Nirmala Sitharaman told reporters after the 45th meeting of the GST Council in Lucknow that the Council has also decided to set up two ministerial groups to look into further tax rate rationalization and ways to improve tax compliance. These panels will give suggestions in two months, which will form the basis for the next stage of fine-tuning the indirect tax system that is expected to address a major structural issue—a reduction in the overall indirect tax base after India adopted GST.
The GST Council looked into the direction from Kerala high court on whether petrol and diesel should be brought into GST but after due deliberation, decided that it was not appropriate to do so at this stage, Sitharaman explained. This will be communicated to the court.
In order to improve tax compliance, the Council also decided that e-commerce operators in the passenger transport and restaurant services segments will be liable to collect taxes and pay to the government. At present, the tax on food sold through an online delivery platform is charged by the restaurant. However, very small restaurants may not have GST registration and, hence, may not actually be collecting this tax. There also could be deliberate tax evasion by some restaurants. Shifting the onus of tax collection to the e-commerce platform is expected to improve compliance. This will apply to entities such as Zomato Ltd and Swiggy (Bundl Technologies Pvt. Ltd). Revenue secretary Tarun Bajaj, who was present at the briefing, explained that this was not a new tax. This method of tax collection is already applicable to certain e-commerce players that offer services of professionals such as electricians and painters.
“E-commerce operators like Swiggy, Zomato, etc., would need to raise their own invoices and deposit GST to government even if the actual restaurant supplier is not liable to pay GST due to its turnover being below threshold limit. The move might help in increasing GST collections from restaurant supplies by shifting the taxing duty on established business players instead of small restaurants," said Abhishek Jain, tax partner at EY.
The Council also examined the revenue position of central and state governments but found GST compensation cess levied on items like luxury cars and aerated drinks will have to be continued till March 2026 to repay funds borrowed in FY21 and what is to be borrowed this fiscal to finance GST compensation to states. This meant that states’ demand for extending GST compensation for another five years beyond 2022 could not be accommodated now.
The Council decided to extend the tax exemption on anti-fungal drug amphotericin B, anti-inflammatory drug tocilizumab and the concessional 5% applicable on covid treatment remdesivir and anti-coagulants like heparin till the end of December. This relief was to expire at the end of September.
The Council also decided to reduce the tax rate on cancer drug Keytruda from Merck & Co. from 12% to 5%. The Integrated GST (IGST) on Novartis’ spinal muscular atrophy treatment Zolgensma has also be reduced from 12% to zero when imported for personal use. Tax rates on Viltespo, used in the treatment of Duchenne muscular dystrophy and other medicines used in the treatment of muscular atrophy, have also been brought down from 12% to zero when imported for personal use.
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