The new compliance and rules of Goods and Service Tax (GST) regime will be restricting small vendors and restaurants from the selling online due to issues of TCS.
Under the indirect taxation structure, e- commerce firms will have to pay tax collected at source (TCS) when they will make payments to restaurants or vendors by using their platform. This can discourage small restaurants and vendors along with lower sales from going online.
Anita Rastogi, Partner of Indirect tax at advisory firm PwC, “Besides, these vendors will receive their payment after a TCS of 2% (1% each of Central GST and State GST) which will cause disruption in their working capital supply.”
Under this case, restaurants and vendors will be entitled to claim for input tax credit and obtain a return for the TCS that they paid earlier. But when the refund will arrive, the amount of working capital of the restaurant will be blocked for that period of time.
Saurabh Kochhar, co-founder and chief executive of Foodpanda said, “We have been speaking to restaurants, trying to convince them that it is good for them in the long term.” He further added that “Some have agreed but some we will see. There is still time to go for GST implementation.”
Kochar said Foodpanda and other e- commerce restaurant firms have been requesting to the government in a concern of TCS through the Federation of Indian Chambers of Commerce and Industry (FICCI).
Kochar said, “Aggregator models are best suited for smaller restaurants, vendors, and businesses,” He also said that TCS would hit the process of bringing more and more restaurants on board. “We have not been bringing on very small hawkers or hole-in-the-wall sort of fast food makers.”
Anita Rastogi said, “Businesses under the threshold limit for GST will be forced to register for the GST network simply for using e-commerce services.” She further added that “This is a tax burden that many may not want to take.” Under the new GST Regime, restaurants or vendors those are providing online delivery are not eligible to avail the composition scheme.
Pradeep Jain, owner of Jain Sweets & Bhelpuri House at Kandivali in Mumbai. He is also the FSSAI chairperson of the Association of Indian Hotels and Restaurants (AHAR). He said, “For restaurants with less than Rs75 lakh turnover, they are allowed a composition scheme which is a simplified form for GST and they will not have to do separate invoicing.” He further added that “But if you are online (using online delivery service) there you cannot use this composition scheme,” he said, adding that this is only further deterring restaurants.
The Association has been requesting to the government in a concern of online delivery as well as other GST rates. These include AC restaurants levying 18 percent GST Rates and it is also applicable on restaurants which are further divided into AC and non-AC seating.
“I have been told that restaurants in our association are waiting to see what happens,” Jain said. There is too much uncertainty to make a decision yet.