The Goods and Services Tax (GST) Council on October 8 proposed to impose 5 per cent GST on certain delivery services offered through e-commerce operators (ECO). Input Tax Credit (ITC) will not be available on these. Its purpose is to bring uniformity in the method of tax on e-commerce delivery. The government wants to remove confusion regarding the implementation of GST on delivery of goods through different modes.
GST) The Council's proposal includes delivery services other than courier and postal services. These services are provided through ECO under Section 9(5) of the Central GST (CGST) Act. The person providing these services is not bound to do GST registration under Section 22(1).
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Also recommended to remove GTA exemption
A separate 5 percent GST is also proposed on delivery services related to goods sold or ordered through ECO. ITC will not be available on this also. The recommendations also include removing the existing exemption from the Goods Transport Agency (GTA). This exemption is available on transportation of goods by unregistered persons. The removal is recommended for cases where the goods are supplied or ordered through ECO.
5 percent GST on e-commerce
Government sources clarified that no matter the mode of delivery of e-commerce goods, 5 percent GST will be levied on it. Earlier there was exemption from GST on transportation through GTA. Now 5 percent GST will be applicable on delivery through all types of transport modes. The proposed changes will make GST rules on delivery clearer in the rapidly growing e-commerce and quick commerce sector. However, tax costs may increase in some transactions.
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What will be the impact on the common man?
For the common man, this proposal simply means that ordering goods or food from e-commerce and quick-commerce companies like Swiggy, Zomato, Blinkit, Zepto and Amazon may become a little more expensive. When 5 percent GST will be levied on the delivery fees charged by these platforms and the companies will not even get the benefit of input tax credit.
Companies can pass the burden of this additional tax directly on the pockets of customers. This tax will not be on the price of the entire item, but only on the separate delivery and handling charges. For those who frequently order online, the expenses will increase.