India’s food delivery and quick commerce sector is facing a new cost burden after the Goods and Services Tax (GST) Council announced that delivery fees would now attract an 18% GST. Finance Minister Nirmala Sitharaman confirmed this decision following a meeting of the GST Council.
The GST will apply to delivery charges for services provided by platforms like Zomato, Swiggy, and Blinkit. The expected impact on individual orders will be modest but could accumulate to a significant amount for these companies at scale.
For Zomato, which currently charges a delivery fee of Rs 11-12 per order, this could mean an additional cost of around Rs 2 per order. Similarly, Swiggy, with an average delivery fee of Rs 14.5, would face an additional cost of approximately Rs 2.6 per order. Swiggy’s quick commerce platform, Instamart, which has lower average delivery fees of around Rs 4, will likely see a smaller impact of about Rs 0.8 per order.
Blinkit, Zomato’s quick commerce arm, might not be significantly impacted by this change, as its delivery fees were already included in revenue and were subject to GST.
The government’s decision, effective from September 22, aims to close a loophole where companies previously avoided GST by classifying delivery fees as pass-through expenses rather than as revenue. This new rule mandates that platforms pay 18% GST on delivery charges.
The timing of this change is crucial as food delivery services are gearing up for the festive season in India. Companies like Zomato and Swiggy have already implemented various charges, including higher platform fees, surge pricing, and additional delivery charges for long-distance orders. Recently, Zomato has introduced a Rs 12 charge per order, while Swiggy has increased its platform fee to Rs 15.
Although the per-order increase may seem modest, it could generate significant revenue for these companies. With Zomato and Swiggy handling about five million food orders daily, even a Rs 2 to Rs 3 increase in delivery fees could result in substantial additional revenue.
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