GST Dept Probes Restaurants Over Suspected Tax Evasion on Packaging Charges

The Goods and Services Tax (GST) department is reportedly investigating restaurants to determine whether they have evaded taxes on 'packaging charges'.

This follows previous interventions by tax authorities to recover GST on 'food and delivery' fees, according to a report by The Economic Times.

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One.in has not independently verified the accuracy of the claims made in the report.

The latest development comes as several restaurants listed on food aggregator platforms such as Zomato have received summons from the department in recent months, requesting details of GST payments made on packaging charges since January 1, 2022.

Tax officials are reportedly concerned that the GST collected from customers for packaging may not have actually been remitted to government coffers, the report states.

Under GST regulations, service providers are required to pay tax to the government, which they subsequently recover from the customers receiving the service.

In this case, the service provider is expected to pay tax on the food, delivery, and packaging components of an order placed via online platforms.

However, there is now a dispute as to whether it is the restaurant or the online delivery platform that should be liable for the GST.

"Apps consider packaging a separate supply and believe that restaurants alone are responsible for paying the tax," the report quoted Dinesh Agrawal, co-head of the indirect tax practice at law firm Khaitan & Co.

Conversely, some experts argue that if packaging charges are itemised separately on the bill, they should be treated as an independent supply and therefore taxed at the restaurant's end. This view was shared by Ashish Karundia, founder of the accountancy firm Ashish Karundia & Co.