E-commerce Operators' GST Responsibility for Restaurant Services

The Goods and Services Tax (GST) Council announced that from January 1, 2022, e-commerce operators (ECOs) would be responsible for paying GST on restaurant services provided through their platforms, rather than the individual suppliers.

GST Application Before January 1, 2022

Previously, restaurant service providers were liable for paying tax when their services were offered via e-commerce platforms. E-commerce operators were only required to collect Tax Collected at Source (TCS) and file Form GSTR-8 for these restaurant services.

GST Charges Effective January 1, 2022

The Central Board of Indirect Taxes (CBIC), through Notification No. 17/2021, expanded the scope of Section 9(5) of the CGST Act, 2017, to include restaurant and cloud kitchen services. Under this revised section, e-commerce operators must now pay GST at a rate of 5% on all restaurant services facilitated through their platforms. Consequently, online food delivery applications are now obligated to remit GST. This notification, however, does not apply to restaurant services offered at designated physical premises.

Clarifications from Circular 167/23/2021

The following clarifications were issued by a circular in response to queries from taxpayers:

• Are ECOs still required to collect TCS under Section 52 of the CGST Act, 2017? No. Since ECOs are now responsible for paying GST on restaurant services as of January 1, 2022, they are no longer required to collect TCS or file GSTR-8 for restaurant services where they remit GST under Section 9(5) of the CGST Act, 2017.

• Do ECOs need separate registration for making tax payments under Section 9(5)? No. If an ECO is already registered under Rule 8 of the CGST Rules, 2017, additional registration is not necessary for remitting tax payments under Section 9(5).

• Is the ECO required to pay tax if the restaurant service provider is unregistered? Yes, the ECO remains liable to pay tax even if the restaurant service provider is an unregistered entity.

• Are restaurant services provided through an ECO included in the restaurant service provider's aggregate turnover calculation? The total value of supplies made through ECOs must be included in the restaurant service provider's aggregate turnover calculation.

• Can restaurant services supplied through an ECO be considered an inward supply for the ECO? No. ECOs are not the recipients of the restaurant services facilitated through their platforms.

• Are ECOs required to reverse proportional Input Tax Credit (ITC) on input goods because ITC is unavailable for restaurant services? ECOs primarily offer their own intermediary services, earning commission. For these services, they utilize input services on which they can claim ITC. This ITC can be used to pay GST on the ECO's own services (e.g., commission charged to a restaurant). This scenario remains unchanged even with the ECO's new tax liability for restaurant services. Therefore, ECOs are not obligated to reverse proportional ITC on input goods.

• Can ECOs use ITC to pay tax on restaurant services supplied through their platform? No, the tax liability for restaurant services must be settled solely through cash payments.

• Will supplies of goods or services other than restaurant services by the ECO be taxed at 5% without ITC? For supplies distinct from restaurant services, ECOs will continue to collect and pay GST as they did previously. For any supply not covered under Section 9(5), the GST payment responsibility rests with the supplier, and the ECO will continue to collect TCS on such supplies.

• Should restaurant services and other goods/services supplied to a customer under a single order be billed separately? Who is responsible for invoicing? In such instances, the ECO must issue a separate invoice for the restaurant service provided through its platform. For supplies other than 'restaurant service' facilitated by the ECO, the responsibility for issuing invoices remains with the supplier, and the ECO will only collect TCS on those specific supplies.

• How should restaurant service value and tax liability be reported in GST returns? ECOs can report GST payments by uploading details as outward taxable supplies in GSTR-3B. Additionally, they can report the specifics of restaurant services under Section 9(5) in either Table 7A(1) or Table 4A of GSTR-1.