GST on Restaurant Services through Zomato, Swiggy, etc. & Reporting in GSTR-3B

[CA Bimal Jain]

The Goods and Services Tax Network (“GSTN”) vide Advisory dated July 20, 2022 state that E-Commerce Operator (“ECO”) are liable to pay GST on specified supply of services under Section 9(5) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) viz. Passenger Transportation Services, Accommodation Services, House Keeping Services and more specifically, Restaurant Services and all provisions of the CGST Act shall apply to such ECO as if he is the supplier liable for paying the tax in relation to the supply of such specified services.

Earlier, restaurant  was liable to pay GST on their restaurant services  but, w.e.f  January 01, 2022, GST  on restaurant services supplied through the ECO viz. Zomato and Swiggy, etc., is to be  paid by the ECO in cash at the rate of 5% and no Input Tax Credit (“ITC”) can be availed on such supplies irrespective of fact whether the restaurant is registered or not.

Accordingly, a new table Table 3.1.1 has been inserted as per [Notification No. 14/2022 – Central Tax dated July 05, 2022] in Form GSTR-3B and the same will be available on the GST portal from August 01, 2022 wherein both the ECO and registered restaurant can report supplies made under Section 9(5) of the CGST Act as mentioned below:

“3.1.1. Details of supplies notified under sub-section (5) of section 9 of the Central Goods and Services Tax Act, 2017 and corresponding provisions in Integrated Goods and Services Tax/Union Territory Goods and Services Tax/State Goods and Services Tax Acts.”

Nature of Supplies	Total Taxable Value	Integrated Tax	Central Tax	State/UT Tax	Cess
(1)	(2)	(3)	(4)	(5)	(6)
(i) Taxable supplies on which electronic commerce operator pays tax under Sub-section (5) of Section 9 [To be furnished by the electronic commerce operator]
(ii) Taxable supplies made by the registered person through electronic commerce operator, on which electronic commerce operator is required to (5) pay tax under Sub-section of    Section 9 [To be furnished by the registered person making supplies through electronic commerce operator.]

The ECO is required to report supplies made u/s 9(5) in Table 3.1.1(i) of GSTR-3B and shall not include such supplies in Table 3.1(a) of GSTR-3B. The applicable tax on such supplies shall be paid by ECO in Table 3.1.1(i) of GSTR-3B in cash only and not by ITC.

A registered person who is making supplies of such services as specified u/s 9(5) through an ECO, shall report such supplies in Table 3.1.1(ii) and shall not include such supplies in Table 3.1(a) of GSTR-3B. The registered person is not required to pay tax on such supplies as the ECO is liable to pay tax on such supplies.

Earlier, the CBIC has issued various clarifications regarding restaurant services provided through the ECO vide [Circular No. 167/23/2020- GST dated December 17,2021]

• Would ECOs have to still collect TCS in compliance with section 52 of the CGST Act, 2017?

As ‘restaurant service’ has been notified under section 9(5) of the CGST Act, 2017, the ECO shall be liable to pay GST on restaurant services provided, with effect from January 01, 2022, through ECO. Accordingly, the ECOs will no longer be required to collect TCS and file GSTR 8 in respect of restaurant services on which it pays tax in terms of section 9(5). On other goods or services supplied through ECO, which are not notified u/s 9(5), ECOs will continue to pay TCS in terms of section 52 of CGST Act, 2017 in the same manner at present.

• Would ECOs have to mandatorily take a separate registration w.r.t supply of restaurant service notified under 9(5) through them even though they are registered to pay GST on services on their own account?

As ECOs are already registered in accordance with rule 8 (in Form GST-REG 01) of the CGST Rules, 2017 (as a supplier of their own goods or services), there would be no mandatory requirement of taking separate registration by ECOs for payment of tax on restaurant service under section 9(5) of the CGST Act, 2017.

• Would the ECOs be liable to pay tax on supply of restaurant service made by unregistered business entities?

Yes. ECOs will be liable to pay GST on any restaurant service supplied through them including by an unregistered person.

• What would be the aggregate turnover of person supplying ‘restaurant service’ through ECOs?

It is clarified that the aggregate turnover of person supplying restaurant service through ECOs shall be computed as defined in section 2(6) of the CGST Act, 2017 and shall include the aggregate value of supplies made by the restaurant through ECOs. Accordingly, for threshold consideration or any other purpose in the Act, the person providing restaurant service through ECO shall account such services in his aggregate turnover.

• Can the supplies of restaurant service made through ECOs be recorded as inward supply of ECOs (liable to reverse charge) in GSTR 3B?

No. ECOs are not the recipient of restaurant service supplied through them. Since these are not input services to ECO, these are not to be reported as inward supply (liable to reverse charge).

• Would ECOs be liable to reverse proportional ITC on his input goods and services for the reason that ITC is not admissible on ‘restaurant service’?

ECOs provide their own services as an electronic platform and an intermediary for which it would acquire inputs/input service on which ECOs avail ITC. The ECO charges commission/fee etc. for the services it provides. The ITC is utilised by ECO for payment of GST on services provided by ECO on its own account (say, to a restaurant). The situation in this regard remains unchanged even after ECO is made liable to pay tax on restaurant service. ECO would be eligible to ITC as before. Accordingly, it is clarified that ECO shall not be required to reverse ITC on account of restaurant services on which it pays GST in terms of section 9(5) of the Act. It may also be noted that on restaurant service, ECO shall pay the entire GST liability in cash (No ITC could be utilised for payment of GST on restaurant service supplied through ECO).

• Can ECO utilize its ITC to pay tax w.r.t ‘restaurant service’ supplied through the ECO?

No. As stated above, the liability of payment of tax by ECO as per section 9(5) shall be discharged in cash.

• Would supply of goods or services other than ‘restaurant service’ through ECOs be taxed at 5% without ITC?

ECO is required to pay GST on services notified under section 9(5), besides the services/other supplies made on his own account. On any supply that is not notified under section 9(5), that is supplied by a person through ECO, the liability to pay GST continues on such supplier and ECO shall continue to pay TCS on such supplies. Thus, present dispensation continues for ECO, on supplies other than restaurant services. On such supplies (other than restaurant services made through ECO) GST will continue to be billed, collected and deposited in the same manner as is being done at present. ECO will deposit TCS on such supplies.

• Would ‘restaurant service’ and goods or services other than restaurant service sold by a restaurant to a customer under the same order be billed differently? Who shall be liable for raising invoices in such cases?

Considering that liability to pay GST on supplies other than ‘restaurant service’ through the ECO, and other compliances under the Act, including issuance of invoice to customer, continues to lie with the respective suppliers (and ECOs being liable only to collect tax at source (TCS) on such supplies), it is advisable that ECO raises separate bill on restaurant service in such cases where ECO provides other supplies to a customer under the same order.

• Who will issue invoice in respect of restaurant service supplied through ECO - whether by the restaurant or by the ECO?

The invoice in respect of restaurant service supplied through ECO under section 9(5) will be issued by ECO.

(Author can be reached at [email protected])

Discussions to this article

[KUMAR Narasimhan]

Dear Sir,

Restaurant who report their sales under GSTR-3B, henceforth to report under 3.1.1(ii) and shall included such supplies under 3.1(c) but in the article it has been mentioned as 3.1(a)

[Dhyey Shah]

Where it is shown in GSTR 1 of the supplier ??