Update to GST Guidelines for F&B Businesses (1st Jan 2022)
gst guidelines food industry 1 january 2022

Recently, there has been a lot of noise and confusion in the F&B industry, related to the update in GST rules that were imposed from 1st January 2022. This article will help you understand – what are those changes? How will they impact the industry, and most importantly, what are your action points?

Few facts to note before we proceed:

  1. A GST of 5% is levied on food and non-alcoholic beverages, while for an alcoholic beverage, the GST is 15%.
  2. The service charge (usually 10%) is only levied on walk-in customers and plays no role in delivery orders or take-aways.
  3. For businesses that have a turnover of less than 20 lakh, GST is not mandatory.

The world before 1st January 2022

An F&B business gets its orders from a variety of sources:

  • Walk-in customers who come to dine in at the outlet
  • Phone-Call orders that are usually for delivery or takeaway
  • Delivery/Takeaway orders from the website of the business
  • Delivery/Takeaway orders from the food delivery apps like Zomato and Swiggy

Except for the case of food delivery apps (Zomato, Swiggy etc) the restaurant would get the payments directly from the customer. However, in the case of food delivery apps, they would receive the payment from the customer, from which they used to deduct their commission and pay the remaining balance to the business. The business would then collate the orders from all the sources, calculate the GST applicable and pay it on the total amount. At the same time, the smaller businesses with a turnover of less than 20 lakh didn’t need to pay that GST.

The world after 1st January 2022

As per the new GST guidelines, the food delivery platforms like Zomato and Swiggy are supposed to deduct the GST and pay it directly. Hence, the F&B businesses will be getting the payment after the deduction of commissions as well as the applicable GST, while earlier, only commissions were deducted.

For businesses that were filing GST, this would mean they would not need to pay any taxes on the orders from Food Delivery platforms as GST has already been paid on their behalf, by the food-delivery platforms. They would still need to pay the GST for other orders which came through walk-in, phone calls, or website. However, this will not cause any loss or profit for them.

The smaller businesses, however, which had turnover less than 20 lakh and didn’t need to file GST will take a hit. The GST will still be deducted on the orders that they get from food delivery platforms. This would mean a further deduction of 5% on their payments.

Your action points:

Most F&B businesses use a point of sale solution (a.k.a. POS) which helps them collate the order from all the sources into one place. The POS would also calculate the GST that needs to be filed on their behalf. However, after this change, your POS needs to be updated since the method of calculation of GST has changed. You’ll need to ensure that your POS has updated its GST calculation method and is excluding the orders from food-delivery platforms (Zomato/Swiggy) in those calculations, otherwise, you’ll end up paying double-tax on those orders.

We recommend Posify, the POS which has already updated its algorithms and is 2022-Ready. You can get started for free, by signing up at https://onboarding.posify.in

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