From Swiggy to Foodpanda, online food delivery service firms face GST heat

Online food delivery service companies like Swiggy are facing the heat from restaurants after the goods and services tax (GST) on eating outlets was cut to five per cent, from 18 per cent in November, and input tax credit provision was withdrawn.

Some restaurants have started charging higher prices on online food delivery platforms. Others are negotiating a commission cut with online food delivery partners to make up for the 3.5 per cent additional cost due to unavailability of the input tax credit (ITC) facility.

Swiggy, Zomato and Foodpanda provide online delivery services to restaurants at a commission of around 20 per cent, which is levied an 18 per cent GST. Unlike earlier, restaurants can no longer claim ITC on the 18 per cent GST for the input services from these delivery platforms. “These online food delivery companies have represented for a rate reduction or to allow ITC to restaurants. The matter is being discussed," said a government official.

Swiggy, which holds about 60 per cent market share and delivers 450,000 orders a day, has approached the government for rate reduction to five per cent.

Food delivery services are taxed at 18 per cent, which the restaurants have to pay. But, they cannot now avail of any tax credit against input services.

A senior executive of a major online food delivery player said they had been under pressure from restaurants to cut margins by three to four per cent. He added other restaurants had, on their own, increased the prices on their platform. “We do not have an exact number but many restaurants are slowly increasing the prices on online delivery platforms, which is a setback,” he added.