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GST On Restaurant Services Supplied Through E-Commerce Operators (ECOS)

“When you order from Swiggy, who pays the GST – the dhaba or the app?” Let’s find out.

 

Introduction: Who Are E-Commerce Operators (ECOs)?

In the digital age, food is just a few clicks away. Platforms like Swiggy, Zomato, Uber Eats have become household names. These are called E-Commerce Operators (ECOs) under GST — platforms that facilitate the supply of goods or services (in this case, food) between a supplier (restaurant) and a customer (you).

Earlier, the restaurant supplying the food was responsible for charging and paying GST. But this changed on 1st January 2022 — and the liability shifted to the ECOs themselves.

Let’s break down what changed and what it means for businesses and consumers alike.

The Legal Shift: Notification & Section 9(5)

As per Section 9(5) of the CGST Act, 2017, the Government may notify certain services where the ECO, instead of the actual supplier, is liable to pay GST.

Based on the recommendations of the 45th GST Council Meeting (held on 17th September 2021), the government issued Notification No. 17/2021-Central Tax (Rate) dated 18.11.2021, which included:

“Restaurant services (other than those provided by restaurants located in hotels having a declared tariff above ₹7,500)” under Section 9(5).

That means: From 01.01.2022, Zomato or Swiggy — not the restaurant — has to pay GST on the food orders delivered through their platforms.

Detailed Clarification: CBIC Circular No. 167/23/2021-GST

To clarify how this shift would work in practice, the CBIC issued Circular No. 167/23/2021-GST dated 17th December 2021. Here's what it said:

1. No TCS on Restaurant Services

ECOs were earlier required to collect Tax Collected at Source (TCS) under Section 52. Now, for restaurant services (under 9(5)), TCS is not required. However, for other supplies (like grocery), TCS continues as before.

 

2. No New Registration Required for ECOs

If an ECO is already registered under GST, no separate registration is needed for paying tax on restaurant services under Section 9(5).

 

3. Even Unregistered Restaurants Covered

Even if the restaurant is not registered under GST, the ECO still needs to pay tax on the food supplied through its platform.

 

4. Restaurant's Turnover Includes ECO Sales

The sales made by a restaurant through an ECO will be included in its aggregate turnover, even if the ECO pays GST on it.

 

5. No Reverse Charge Entry in GSTR-3B

The ECO is not considered the recipient of the restaurant service. Hence, it should not show it as inward supply under reverse charge in GSTR-3B.

 

6. No ITC Reversal Required by ECO

ECOs can continue to claim ITC on their own platform-related inputs like rent, tech, etc. But — they cannot use that ITC to pay GST on restaurant services. That tax must be paid in cash.

 

7. Mandatory Cash Payment of GST on Food

GST on restaurant services supplied through ECO must be paid in cash only by the ECO. No input tax credit (ITC) can be utilized for this purpose.

 

8. Mixed Orders Must Be Billed Separately

If an order includes both food and non-food items (like packaged drinks), ECO must issue separate invoices:

• One for restaurant services (ECO pays GST)
• One for other items (restaurant pays GST)

 

9. Who Issues the Invoice?

The ECO will issue the invoice to the customer for the restaurant service, not the restaurant.

10. How to Report in Returns?

• ECO reports restaurant services in GSTR-3B (outward taxable supplies)
  and GSTR-1 in Table 7A(1) or Table 4A.
• Restaurants must also report these sales for turnover purposes in
  GSTR-1 (Table 8) and GSTR-3B (Table 3.1(c)), even though they aren’t liable to pay tax.

 

Illustration: Order from a Dhaba via Zomato

Order Amount: ₹500

Restaurant: “Desi Dhaba”

Platform: Zomato

Particular	Before 1 Jan 2022	After 1 Jan 2022
GST Charged By	Desi Dhaba	Zomato
GST Rate	5% (No ITC)	5% (No ITC)
Who Paid Tax?	Restaurant	Zomato
Invoice From	Restaurant	Zomato
Return Filing	By Restaurant	Restaurant + Zomato

 

Exceptions – What’s NOT Covered?

The shift under Section 9(5) does not apply to:

1.    Restaurants in luxury hotels (tariff > ₹7,500)

2.    Dine-in or takeaway orders not routed through ECOs

3.    Any non-restaurant items sold through ECOs (like groceries)

 

Conclusion:

The GST Council’s move to shift tax liability on restaurant services (excluding specified premises) supplied through ECOs from restaurants to the ECOs under Section 9(5) is a major compliance and tax administration shift. It simplifies GST for small restaurants but also brings added responsibility on platforms like Swiggy and Zomato.

Taxpayers involved in such supplies – whether ECOs or restaurants – must carefully follow invoice, registration, payment, and return protocols to avoid penalties or audit risks.

 

Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

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