Tax Authorities Open Probe Into Restaurants' Packaging Charges, Says Report. But Who Should Pay The GST?

The tax authorities are now turning attention to a new front in their investigation into restaurant billing practices—packaging charges. Following earlier actions related to the taxation of food and delivery fees, the goods and services tax (GST) authorities have reportedly started examining whether restaurants are complying with tax regulations on packaging costs. 

Several food outlets listed on delivery platforms like Zomato have been issued summons by the GST department, demanding records of tax payments on packaging since January 1, 2022, reported The Economic Times.

Under the GST framework—implemented on July 1, 2017—businesses providing goods or services are responsible for collecting and remitting GST to the government. When customers place orders on food delivery platforms, the total bill typically includes separate charges for food, delivery, and packaging. While there is no dispute over the taxability of food, and delivery charges remain under review, tax officers are now focused on packaging fees, which are also paid by customers. Officials are trying to determine whether those collections were duly transferred to the exchequer, the report said citing sources in the know.

Legal Interpretations Of Classifying Packaging

Industry experts suggest the matter hinges on how packaging is classified under GST rules. Quoting Ashish Karundia, founder of Ashish Karundia & Co, the report explained, "Under the GST law, when two or more goods or services are supplied together in the ordinary course of business, it's treated as one combined supply. The law gives an example: if goods are packed and shipped, everything involved, like the goods, packaging, and transport, is considered one package, and the main item (the goods) decides the classification of supply and tax rate applicable to such supply."

Based on this view, packaging could be treated as incidental to the supply of food, making the delivery platforms—like Zomato or Swiggy—liable for the GST, just as they are for food charges. However, Karundia also noted that if the packaging is separately itemised in the invoice, it may be considered an independent supply. In that case, the tax burden could shift to the restaurant itself.

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Billing Complexities Raise New Questions

The confusion deepens when examining how transactions are processed. For example, if a customer places an order worth Rs 1,000 in food, and pays Rs 100 each for delivery and packaging, the total bill comes to Rs 1,260—including Rs 60 in GST, calculated at 5 per cent of Rs 1,200. The platform typically deducts Rs 50 as GST on the food and also applies its service commission before transferring the balance to the restaurant. Authorities are now examining whether the GST on the Rs 100 packaging charge was collected and reported properly, and who—platform or restaurant—is responsible for that payment, the report pointed out.

This probe ties into broader provisions under Section 9(5) of the Central GST Act, which places the onus of tax collection and payment on aggregator platforms operating across sectors such as food delivery, ride-hailing, and accommodations. 

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