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Local delivery services supplied through an electronic commerce operator (ECO) are taxable at 18% GST, according to the Ministry of Finance’s FAQ on the decisions of the GST Council’s 56th meeting. The “5% without input tax credit (ITC)” framing in circulation does not match that official clarification. What decides who pays the tax is whether the person making the delivery is required to register under section 22(1).
What the official clarification says about the rate
The Council’s 56th meeting took place on 3 September 2025. The Ministry of Finance then published FAQ-2 on 16 September 2025, which addresses the changes. On the rate, the FAQ states: “The services of local delivery are taxable at 18%.”
Nothing in that clarification places local delivery in the 5% category or describes it as a supply without input tax credit. Reports that combine the two should be treated with caution, and the 5% figure should not be attached to this service on the basis of the official material.
Who pays the tax: two cases
The FAQ separates the liability question by the status of the delivery supplier. The rate is 18% in both cases; only the person who must pay it changes.
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| Supply arrangement | Stated rate | Party liable under the FAQ-2 explanation | Input tax credit treatment |
|---|---|---|---|
| Local delivery through an ECO, where the delivery supplier is not liable to register under section 22(1) | 18% | The ECO, under section 9(5) | Not stated in the FAQ answer |
| Local delivery supplied by a registered person, directly or through an ECO | 18% | The registered local-delivery supplier | Not stated in the FAQ answer |
Source: Ministry of Finance, FAQ-2 on the 56th GST Council decisions, published 16 September 2025.
When the platform is liable: section 9(5)
Where a person delivering through an ECO is not liable to register under section 22(1), section 9(5) shifts the payment obligation to the operator. The FAQ puts it directly: “In such cases, the liability to pay GST will be on the ECO.” The operator, not the individual or small delivery provider, is therefore the taxpayer for those supplies.
When the delivery supplier is registered
A registered local-delivery supplier pays the 18% itself, including when the supply is made through an ECO. Routing the booking through a platform does not by itself move the liability to the platform in this case.
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Why the “5% without ITC” wording does not apply here
The phrase “without ITC” describes a specific treatment that the same FAQ explains separately for services taxed at 5%. Under that treatment, a supplier cannot take credit on inputs used exclusively for the 5% service, and credit on shared inputs must be reversed in proportion to the share used for it. Those rules are relevant only where a supply is actually in that category. The official clarification on local delivery sets the rate at 18%, so the no-ITC mechanics described for 5% services are not the operative rule for this service.
What the official sources do not establish
The FAQ and the Council announcement do not explain how platforms will pass the tax through to consumers in delivery charges. No official figure on consumer price pass-through, local-delivery volumes, business costs or revenue effects appears in the material. A claim that customer delivery charges will rise or fall by a specific amount is therefore not supported by these sources.
The scope is also narrow. The clarification addresses local delivery services supplied through an ECO. It does not cover food supply by restaurants, the transport of goods, or every other service a delivery platform offers.
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Timeline and effective dates
- 3 September 2025: The GST Council holds its 56th meeting and makes the recommendations.
- 16 September 2025: The Ministry of Finance publishes FAQ-2, which states the 18% rate and the liability rules for local delivery.
- 22 September 2025: The Council’s recommendations state that changes to service rates would generally take effect on this date.
- 17 September 2025: Certain goods-related notifications are dated this day. These concern goods, not local delivery, and do not themselves establish a local-delivery notification.
Before you rely on this for compliance
These positions come from official material dated September 2025. The Council’s general effective date for service-rate changes is stated as “generally” applicable, so it should not be read as confirmed for every entry. Before using this for invoicing or filing, check for any later notification or amendment that implements the local-delivery rate, and confirm the rate and liability position against that primary instrument. Whether a particular delivery supplier must register under section 22(1) is a factual question that depends on that supplier’s circumstances.
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In short, for a registered delivery supplier the tax is 18% and is payable by the supplier. For an unregistered supplier delivering through an ECO, the tax is 18% and is payable by the ECO.
The FAQ’s exact wording on liability is “In such cases, the liability to pay GST will be on the ECO.” Readers who want the operative sentence should cite it as Ministry of Finance FAQ-2 on the 56th GST Council decisions, published 16 September 2025.
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