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India 5% GST extension to ride sharing and food delivery platforms Jan 2022

5% GST on gig and sharing economy platform aggregators 1 January 2022

The Indian Goods and Services Tax Council (GST council) has extended the GST net to providers and online platforms offering the following services on their own account or via third-party merchants on their platforms = ‘e-commerce operators’:

  • Tax rides
  • Ride sharing (e.g. Uber and Ola)
  • Food delivery (e.g. Swiggy and Zomato)
  • Other restaurant services

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Such a change could come into place from 2022. Its aim is to bring in many operators who have escaped the tax liability at the expense of regular high-street providers. This was part of a range of recommendations from the 45th GST council meeting in September.

The current Indian GST rates are:

  • 28% – vehicles; fizzy drinks; air conditioners; nightclub entrance; luxury hotels and restaurants, and gambling
  • 18% main rate applying to over 450 defined goods and services, including luxury restaurants and hotels
  • 12% second main rate applying to over 250 defined goods and services including other hotels and restaurants; non-dwelling construction
  • 5% – passenger air travel; construction of dwellings; restaurants

Global evaluation of role of platforms and VAT / GST collections

The EU is also reviewing VAT treatment for the platform economy, which includes the gig and sharing economies. And the DAC 7 EU marketplace reporting requirements come into effect on 1 January 2023. A UK VAT on gig and sharing economies review is also now underway. Reach about the attractions and challenges of making marketplaces responsible for VAT collections in the form of withholding taxes or as the VAT principal.

The new obligations for the digital economy place tightened requirements on live VAT or GST determination. VAT Calc’s tax engine, ‘VAT Calculator’, has been developed with the deemed supplier requirements facing such platforms, giving them the agility to live calculate and report invoice data.

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