A piece of important information for all the Indian taxpayers and businesses. The GST Council had identified that the exchequer suffered a hefty loss. Because of underreporting or no reporting from food and cab aggregators. Therefore, the government has launched new measures to curb tax evasions. These new measures were notified earlier and are coming into effect from 1st January 2022. In this article, we will be understanding the implementation of a new ruling in which the GST Burden shifts to food & Cab, e-commerce operators starting the new year.
What is GST?
GST stands for Goods and Service Tax. It is an indirect tax and the end-consumer is liable to pay the tax. It is the single and destination-based tax in India.
The supplier of goods and services is liable to collect tax from the consumer. Under GST, Goods and services have been classified into distinct tax slab rates.
While luxury and comfort items are classified as higher slabs, requirements are classified as lower or zero slabs. The major goal of this categorization is to guarantee that money is distributed evenly among Indian citizens.
It also allows the businesses to claim the input tax credit for the goods and services used for operating the business. However, you can not avail of the Input Tax Credit without obtaining GST Registration.
GST Updates: GST Burden shifts to Food & Cab, e-commerce operators starting the new year
Following a meeting in September, the GST Council discovered that Swiggy/Zomato and other e-commerce operators did not conduct an obligatory registration check. Also, unregistered eateries and other businesses were offering their product and services on these applications. Over the last two years, this is said to have resulted in a tax loss of Rs. 2,000 crore for the government. Therefore, now the GST Burden shifts to food & Cab, e-commerce operators starting the new year. Hence, GST on the sale of food/Cab service on e-commerce platforms comes under a reverse charge mechanism.
- From January 1, all food-delivery / cab apps will be required to collect and pay GST to the government instead of restaurants selling their food on such e-commerce platforms.
- In addition, they will be required to produce bills or invoices for their services. Any Business can use InstaBill – GST Billing, eInvoice & Accounting App to generate e-Invoices.
- However, This will not impose an additional tax burden on customers because the obligation for tax compliance will be transferred from restaurants to the food-delivery App. Previously, Restaurants had to collect and deposit GST.
- Similarly, Ola/Uber and likewise other businesses will have to collect GST from their drivers.
- Notably, From January 1, any e-commerce business that provides auto/cab services will have to pay a 5% GST. Previously, the government charged a 6% service fee to users of these applications. As a result, the cost of an Ola or Uber ride may be reduced slightly in the new year.
- Nonetheless, passenger transportation services supplied by auto-rickshaw drivers in an offline/manual mode would continue to be GST-free.
Reverse Charge Mechanism Under GST
As per GST Norms, the supplier has to collect the tax from the consumer and then submit it to the government. However, the reverse happens in some cases. It is known as the reverse charge mechanism.
In simple words, under the reverse charge mechanism, the receiver or the consumer himself is liable to pay the taxes to the government. The applicability of the Reverse Charge Mechanism under GST is as follows:
- The reverse charge applies if a seller who is not having GST Registration under GST delivers products or services to a person who is registered under GST, according to Section 9(4) of the CGST Act. It simply means that the recipient, rather than the supplier, will be responsible for paying the GST. Furthermore, The registered buyer who is required to pay GST under reverse charge must self-invoice and do GST Return Filing for his or her transactions.
- To sell items or deliver services, all sorts of enterprises can employ e-commerce operators as an aggregator. According to Section 9(5) of the CGST Act, if a service provider utilizes an e-commerce operator to deliver goods or services, the e-commerce operator will then be bound to the reverse charge and will be required to pay GST.
- Also, assume that the e-commerce company has no physical presence in the taxable zone. A person who represents such an electronic commerce operator will be responsible to pay tax for whatever reason in such circumstances. If no representative is available, the operator must choose the one who will be responsible for paying the GST.
Other Important Changes to be implemented from January 1st, 2022
Some more anti-evasion measures will take effect on January 1st, 2022. These include:
- Mandatory Aadhaar verification in order to claim a GST refund, as well as restricting the ability to submit GSTR-1 if the firm has not paid taxes or filed a GSTR-3B in the preceding month.
- Currently, the legislation prohibits businesses from filing GSTR-1 returns if they have not filed GSTR-3B for the previous two months.
- Furthermore, The GST regulations have been updated allowing officials to visit business premises to collect tax debts without having to give a show-cause notice beforehand. This will apply in circumstances where the taxes paid in GSTR-3B are lower than the supply details provided in GSTR-1 (due to reduced sales volume).
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