Ordering Food via Zomato or Swiggy to Get Costlier? 18% GST on Delivery Fees May Be Passed to Customers

Business News: If you often order food from Zomato or Swiggy, then soon you may have to loosen your pocket a little more. The GST Council has now decided to impose 18% GST on the delivery fees of food delivery apps. This tax will directly affect the margins and profits of these companies. According to sources, Zomato and Swiggy are preparing to put the burden of this additional tax on customers instead of bearing it themselves. That is, now the delivery fee may increase when ordering food online.

No tax on delivery fees earlier

Earlier there was no tax on the delivery fees of food delivery apps. But now under section 9 (5) of the CGST Act, these platforms will have to pay GST on local delivery services.

• Small delivery agents will remain outside the scope of this GST compliance.
• The purpose of this change is to clarify tax liability and make collection easier.

Planning of companies

According to the report, Zomato and Swiggy are currently studying this new tax policy in depth.

• They are assessing its impact on margins, pricing, and working capital.
• Legal experts believe that this will have a direct impact on food delivery companies, as delivery is their main service.
• While in e-commerce and quick commerce, delivery is considered an ancillary service.

Relief to subscription users

Interestingly, subscription plans like Swiggy One and Zomato Gold will not be directly affected by this at the moment.

• They have been placed in the category of value-added service.
• That is, the members of these plans will not feel the impact of the increase in delivery fees immediately.

The burden will increase on customers

According to an official of a food delivery firm: "If the burden of GST falls more on companies, then it will have a direct impact on customers. However, its effect can be different in different categories."

If companies pass on this tax burden to customers, ordering food online will become expensive. Now it will be interesting to see how Zomato and Swiggy manage this tax and what impact it has on the food delivery industry and customers' pockets.