GST on Bakery Supplies Through Swiggy & Zomato
Who really pays — the bakery or the platform?
One cake. Two platforms. Two different GST treatments.
A bakery sold the same chocolate cake — from the same outlet, the same GST registration, the same tax period — through two food delivery platforms. Swiggy paid GST itself under Section 9(5) of the CGST Act. Zomato deducted 1% TCS under Section 52, leaving the bakery responsible for paying GST.
Same bakery, same cake, same customer experience — but two completely different GST mechanisms. That raises an uncomfortable question: who is actually liable to pay GST, the bakery or the platform? The CGST Act does not directly address this for bakeries, which prepare some products fresh and sell others as packaged goods.
Understanding the Two GST Mechanisms
| Particulars | Section 9(5) | Section 52 |
|---|---|---|
| Purpose | Shifts GST liability | Collects TCS |
| Applicable to | Notified services | Goods & other supplies |
| GST paid by | E-Commerce Operator | Supplier |
| TCS applicable | No | Yes |
| Invoice issued by | ECO | Supplier |
| Return reporting | Table 14(b) & ECO Table 15 | Tables 4–10 + Table 14(a) + GSTR-8 |
| Example | Restaurant service | Sale of packaged goods |
The confusion arises from the phrase “restaurant service.” If a bakery product qualifies as a restaurant service, GST is paid by the ECO under Section 9(5). If it’s merely a sale of goods, Section 52 applies and the bakery pays GST, with TCS deducted along the way.
What Does the Law Actually Say?
Section 9(5) of the CGST Act allows the government to notify services where the e-commerce operator (ECO) becomes liable for GST instead of the supplier. Restaurant services provided through platforms like Swiggy and Zomato were notified under this section from 1 January 2022. In this scenario, the ECO is responsible for paying the GST.
Section 52, on the other hand, does not shift GST liability. Under this section, the supplier remains liable to pay GST on their supplies, and the ECO is required to deduct Tax Collected at Source (TCS) at a specified rate — currently 1% — from the supplier’s payment, and deposit it with the government. The supplier then claims credit for this TCS in their GST returns.
CBIC Circular No. 164 — Illustrative Examples
| Business | GST Treatment |
|---|---|
| Cloud kitchen | Restaurant service |
| Ice cream parlour selling manufactured ice cream | Supply of goods |
The Bakery Problem
A bakery often straddles the line between a restaurant and a retailer. It prepares many items fresh on-site, which resemble restaurant services, while also selling pre-packaged goods that are essentially a supply of goods. The CBIC has not yet provided explicit clarification on how to classify bakery products within these two broad categories.
Freshly prepared items
- Cakes (customised, decorated)
- Pastries
- Puffs & savouries
- Bread (baked fresh daily)
- Cookies (baked fresh on order)
Merely sold finished products
- Packaged cookies
- Packaged bread
- Chocolates (bought & resold)
- Bottled beverages
- Pre-packaged snacks
The “Preparation Test”
Was the item baked, assembled, decorated, or structurally finished for supply at or close to the point of sale? If yes, it assumes the economic character of a restaurant service — Section 9(5) applies.
Is the item distributed as-is, in its original manufactured, sealed packaging, without alteration? If yes, it behaves strictly like trading in goods — Section 52 applies.
GST Return Implications
| Restaurant Service | Supply of Goods |
|---|---|
| Bakery reports in Table 14(b) | Bakery reports in Tables 4–10 and Table 14(a) |
| GST discharged by ECO | GST discharged by bakery |
| No TCS | TCS under Section 52 |
Incorrect classification can lead to significant compliance issues: potential double payment of GST (once by the ECO and again by the bakery), mismatches between GSTR-1 (filed by the supplier) and GSTR-8 (filed by the ECO for TCS), and subsequent notices from tax authorities during reconciliation.
Key Takeaways for Practitioners
- Identify product natureFor each item sold, determine whether it is primarily a “prepared” item or a “merely sold” finished product.
- Restaurant service likelihoodFreshly baked or prepared items, assembled or decorated immediately before sale, are more likely to qualify as restaurant services, with GST liability falling on the ECO.
- Supply of goods likelihoodPackaged products sold without any alteration or preparation at the time of sale likely remain classified as a supply of goods, with GST payable by the bakery and TCS applicable.
- Documentation is crucialMaintain detailed records that explain the preparation process for each product category. This will be vital for substantiating your classification.
- Consistent policyAdopt a consistent classification policy across all platforms used for sales. Avoid varying treatment for the same product on different platforms.
Conclusion: Navigating the Grey Area
GST law clearly distinguishes between restaurant services and the supply of goods, but it does not offer explicit guidance for hybrid businesses like bakeries. Until the CBIC provides further clarification, a practical approach is to carefully examine what is actually being supplied.
The act of preparing, baking, assembling, or decorating a product immediately before its sale leans towards it being a restaurant service, where the ECO handles GST. Retailing a finished, packaged product without any modification aligns with a supply of goods, making the bakery liable for GST and subject to TCS.
Implementing a consistent, preparation-based, and well-documented approach will be key to successfully navigating this complex tax area.