The GST Council May Think Reducing the Tax on Online Meal Delivery Services

Nitin Konde, Varun Bhardwaj

Dec 17, 2024 — 3 min read

GST Council Considers Tax Reduction on Online Meal Delivery

According to reports, at its upcoming meeting on December 21, the Goods and Services Tax (GST) Council will discuss reducing the tax rate on online food deliveries from the current 18% to 5%. According to reports cited by a media outlet, foodtech businesses will not be able to claim the input tax credit (ITC) for delivery fees. According to the report, the Council's Fitment Committee intends to suggest lowering the GST rates, which would take effect on January 1, 2022. By doing this, the government seems to have heeded the demands of foodtech platforms to lower GST on delivery fees and level the playing field with eateries.

The Move will Provide Breather to Zomato and Swiggy

For Zomato and Swiggy, which have been struggling under the weight of numerous GST notices, a decrease in GST rates will bring much-needed respite and clarity. The proposed action is noteworthy since it comes days after Maharashtra's GST authorities ordered foodtech giant Zomato to pay INR 804 Cr, including taxes and penalties, for failing to pay certain taxes between 2019 and 2022. In addition, earlier this year, the company received several GST demand notices from Gujarati, Karnataka, and Haryana officials. Swiggy, its fiercest competitor, may also owe INR 326.7 Cr in GST, according to its most recent draft red herring prospectus (DRHP), which was submitted to SEBI prior to becoming public. The news follows Zomato's November inaugural qualified institutional placement (QIP), which garnered INR 8,500 Cr (about $1 billion).

Recent Developments of Swiggy and Zomato

In October, Swiggy introduced Bolt, a speedy delivery service that promises to bring meals to consumers in as little as ten minutes. This project, which has begun in a few locations, attempts to satisfy the growing customer demand for meal delivery that is quick, tasty, and convenient.

Today Customers are purchasing a wide variety of goods, and food delivery is no exception. Customers simply fall for products more quickly. Whatever the food is, it makes no difference. During the September earnings call, Rohit Kapoor, CEO of Swiggy's Food Marketplace, stated that the business believes Bolt is a major bet here. With a 'Buy' recommendation and a 20% upside potential, Axis Capital began covering Swiggy on December 16 with a target price of INR 640 per share. According to the broking, Swiggy, the second-biggest qcom/food delivery company in India, offers an alluring investment opportunity.

Swiggy launched 'One BLCK' a few days ago, offering customers an invite-only membership for an "elevated" experience that included an On-Time Guarantee and quicker delivery for all food orders. All of the advantages of the current Swiggy One membership, such as unlimited free deliveries on both food delivery and Instamart, as well as special member-only discounts on food delivery and dineout, would also be available to One BLCK members, according to Swiggy.

In an intensified effort to increase food delivery, Zomato has been concentrating on shortening delivery times and expanding restaurant availability. Zomato claimed to have observed an increase in platform usage since delivery times have decreased and food has arrived more quickly.