VARIOUS SCENARIOS THAT MAY BE DISRUPTED WITH THE PROPOSED CHANGES WITH EFFECT FROM 01.01.2022 ON FOOD AGGREGATORS.
We are delighted to share as part of our endeavour to share the impact (for the notification to implement the change is yet to be notified) on the probable impact that is bound to be there on the restaurants/food aggregators as part of he proposed changes to be implemented from January. We are breaking this Note as a two part Note. The first one which is this sets out the scenarios per se. and with the GST applicability on a as is basis for the various scenarios.
This note also sets out the various scenarios that may operate on the food supply ecosystem form the supply of food from Cloud kitchen to restaurant and from restaurant to the end customer either directly or through a food aggregator who is app based and supplies food from the restaurant to the end customer. The taxes payable on a as it ought to be basis is also broadly covered.
The Second part of the note will of course incorporate the characteristics and the narrative of the notification as and when the same is issued. Once we layer the to be proposed changes to various stakeholders in the ecosystem, it would be much easier to understand the to be proposed changes as applicable to various stakeholders.
Assumptions made as a standardised aspect for ease of convenience of various scenarios being discussed.
- Cost of Food- INR 200
- Delivery Charges- INR 50
Terminologies used.
Restaurants to include both supplying food to walk in as well as take-away. Take away includes both take away by the individuals or app based for delivery purpose.
Food aggregator is assumed to be app based where any person using the platform can order for food from an app. For the purpose of convenience we are using example of ZS as a food aggregator.
As part of the food delivery ecosystem, there are also suppliers who may be ecom based service providers for effecting supplies of goods and commute customers from one place to another place and as part of their ecosystem also support ZS in effecting supplies of food on behalf of ZS. Let us for the purpose of this note call them RD.
Tax rates-
GST @5% on Food as part of dine-in in a restaurant. At this point of time, the same rate would be applicable be it dine in or take away or supplied through an app by a food aggregator.
GST @5% on Delivery of Food. Where the liability to pay the taxes is more on ZS than the riders since the riders is likely to fall within the threshold and therefore the incidence has been shifted to the aggregators at this point of time. (This by itself is under dispute and challenged per se)
5% on Transportation of Passengers
18% on Convenience charges or Booking fees or Platform usage charges or by whatever terminology it is called. To be payable by ZS or RD as well. For the purpose of this note setting out the scenarios, the same is called as platform usage charges.
SCENARIO 1
- Customers order on restaurant’s website/app and the restaurant delivers to customers directly to the customers using their own logistics.
- Customer pays the restaurant directly using the website link or COD when the foods is delivered directly to them.
Transaction
Taxability
Food- 200
Delivery-50
Tax @ 5%- 12.5
Restaurant to discharge the tax liability
At times there might be no delivery charge itself. At times even if there is a delivery charge, it may be claimed internally by the Restaurant staff as a reimbursement.
SCENARIO 2
- Customers order on restaurant’s website/app and the restaurant delivers to customers directly to the customers using third party logistics (RD)
- Customers pays the restaurant
Transaction
Taxability
1 On Food
Food- 200
Delivery-50
Tax @ 5% on food – 12.5
Restaurant to discharge the tax liability
2 On Delivery
Delivery Charges- 50
Assuming the ratio between the driver and the transport service provider is 80:20 respectively
Tax at 5% on 40 – 2
Tax at 18% on 10- 1.8
Scenario 3
Customer uses Online Food Applications such as ZS to order food from various restaurants and ZS have their own logistics that pickup food from the restaurant and deliver it to customer
- Customers pay ZS
Transaction
Taxability
1) On Food Delivery/Aggregation
Food- 200
Delivery-50
Tax @ 5% on food – 12.5
Food Aggregator to discharge the tax liability
2 ) Towards restaurant
Food Bill – 200
3) Towards Driver
Assuming the ratio between the driver and food aggregator is 80:20 respectively
Tax at 5% on 40 – 2
Tax at 18% on 10- 1.8
4) Towards platform usage
(Fixed ratio to be decided between restaurant and the food aggregator and tax to be discharged at the rate of 18% on such platform usage fee)
SCENARIO 4
- Customer uses Online Food Applications such as ZS to order food from various restaurants and ZS may use delivery partners such as RD to pick up food from the restaurant and deliver it to customer
- Customers pay ZS
Transaction
Taxability
1) On Food Delivery/Aggregation
Food- 200
Delivery-50
Tax @ 5% on food – 12.5
Food Aggregator to discharge the tax liability
2) Towards restaurant
Food Bill – 200
3) Towards Driver
Assuming the ratio between the driver and food aggregator is 80:20 respectively
Tax at 5% on 40 – 2
Tax at 18% on 10- 1.8
4) Towards platform usage
(Fixed ratio to be decided between restaurant and the food aggregator and tax to be discharged at the rate of 18% on such platform usage fee)
SCENARIO 5
Order on Delivery partners (RD)
- Customer uses delivery partners to order food from various restaurants that probably don’t delivery to their area wherein such delivery partners like RD pickup food from the restaurant and deliver it to customer
- Customers pay such delivery partners including the food bill. This transaction envisages where the delivery partners are expected to pay directly to the restaurant irrespective of whether they have a tie up with the said restaurant or otherwise.
Transaction
Taxability
1) On Food Delivery
Food- 200
Delivery-50
Tax @ 5% on food
RD collects and transfers the same to restaurant, the same is a separate transaction. Restaurant to discharge the tax liability
2) Towards pickup and delivery services
Towards Driver
Assuming the ratio between the driver and food aggregator is 80:20 respectively
Tax at 5% on 40 – 2
Tax at 18% on 10- 1.8
RD collects discharges the tax liability
For Conversations please do reach out to [email protected] or @9703803250