It is the food aggregators, who have raised the issues in context to the GST Compliance and have requested for a thorough review. The Food aggregators like the Zomato, Swiggy and UberEats these days are gaining popularity bases the prompt and services being offered by them. It has started replacing the restaurant businesses but at the same time, the segment has started feeling the heat related to the GST Compliance. Thus, has requested a review.
The problem which the aggregators have been facing is that they are unable to show tax collected at source (TCS) from restaurants through the platform they have been provided with this results in preventing the partner restaurants from claiming credit. In order to get to a better solution for this issue, the Government has referred this issue to a law committee under the GST Council.
“The industry has represented the issue… It will be examined by the law committee,” said a government official privy to the developments. Though no official comment has come from the food aggregators, the Zomato, Swiggy and UberEats.
The problem seems to arise from the action which has been taken in context to the GST composition dealers who have been barred from getting registered to the e-commerce platforms which ultimately prevented food aggregators from filing TCS collected from partner eateries where these partner entities are also under the composition scheme on the GSTN portal. It is that the restaurants enjoy a carveout under the composition scheme and are allowed to get registered to the e-commerce platforms. But, the constraint is that their Tax collected at source are not recorded on the GSTN portal. As a result of which they are deprived of claiming credit or refund. Small restaurants are the one which is getting adversely affected in terms of cash flow.
Just for a recall, under the composition scheme, the small businesses are allowed to opt a fixed tax rate bases their turnover, where it is 5% in case of restaurants. This scheme exempts tedious compliance and paperwork.
Acknowledging the scenario, the Government has considered the requirement for a review of the prevailing system and to find out that whether there is any requirement for a carveout system to be created for small restaurants under the TCS regime. This information has been given by an official. He online utility is also being worked upon by the GSTN in order to facilitate the system.
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The Tax experts gave their opinion on this matter and said that there should be some mechanism to get the issue resolved soon.
“The GST Council needs to take a call either to remove the requirement of TCS on restaurant services for supplies by composition dealers or provide a mechanism to allow the e-commerce operator to file a return for TCS deducted in such cases. Restaurants should be able to claim TCS credit,” said Bipin Sapra, partner, tax and regulatory services, indirect tax, EY.
Some say it may be imperative to relook at the whole TCS itself. “While this seems like a technical issue that can be resolved easily, from a policy standpoint, the TCS mechanism needs a relook. It’s leading to unwarranted compliance issues and preventing small businesses, particularly those supplying goods, from transacting on the e-commerce platform,” said Pratik Jain, indirect taxes leader, PwC.
It has been made mandatory for the E-commerce players to get 1% tax (TCS) deducted on the payments made to their suppliers under the GST regime. The provision for which came into effect from October 1, 2018.
