GST Reform: Salon Services, Yoga Classes To Get Cheaper, But Food Deliveries To Cost More; CBIC Explains Why

Planning a salon visit or yoga class after September 22? You may notice your bill will shrink a little. But if you are ordering food online, be prepared to pay a bit more. The Central Board of Indirect Taxes and Customs (CBIC) issued a fresh set of clarifications on Tuesday (September 16) regarding the new Goods and Services Tax (GST) rates.

The impact of these new rates will be felt most in beauty, wellness, and food delivery services, among other key everyday items used by the citizens.

Salon, Spa, Gym And Yoga Classes

According to the CBIC, services such as salons, gyms, spas and yoga classes will now attract 5 per cent GST without input tax credit (ITC). The earlier option of levying 18 per cent GST with ITC has now been scrapped.

"The 5 per cent without ITC rate on beauty and physical well-being services is mandatory. Service providers do not have the option to charge 18 per cent with ITC on these services," the board clarified in its FAQs.

This means consumers will see smaller bills, especially for wellness services that previously attracted a higher tax. For example, a salon service of Rs 2,000 would earlier include Rs 360 as tax (18 per cent). Now, it will carry just Rs 100 GST. However, the trade-off is that businesses in the sector can no longer claim input credit on the taxes they pay for consumables or equipment.

Industry experts say the cut could bring cheer ahead of the festive season, but service providers may need to recalibrate their pricing models since they lose the benefit of ITC.

Food Deliveries Get Pricier

On the other hand, food delivery charges are set to become costlier for all those online orders. Starting September 22, an 18 per cent GST will apply on delivery services, whether supplied directly or through platforms like Zomato, Swiggy and Magicpin.

The Finance Ministry explained that:

• If delivery services are supplied directly by a registered provider, GST at 18 per cent is payable by them.

• If supplied through an e-commerce operator (ECO) like Zomato or Swiggy, the liability to pay GST shifts depending on whether the delivery partner is registered.

This clarification comes as platforms have already been hiking their platform fees. As reported by The Economic Times, Swiggy has increased its platform fee to Rs 15 (inclusive of GST) in select markets, while Zomato has raised it to Rs 12.50 (excluding GST). Magicpin, too, has revised its fee to Rs 10 per order.

The new GST on delivery charges will add roughly Rs 2 extra per order for Zomato users and Rs 2.6 for Swiggy customers, over and above platform fees. For those who order online food frequently, this tiny addition would pile up as extra costs quickly, especially during the festive season.

The Bottom Line

The new rates under what the government calls 'GST 2.0 Reform' is an effort to simplify the current rate structure and plug revenue leakages across various industries while also giving consumers relief in segments that affect their lives - like personal care.

However, for the food delivery sector, the hike in platform fees and GST raise concerns about whether affordability and convenience (of e-commerce) can run hand-in-hand.