Unveiling the GST Burden on Consumers: The Impact of GST on Swiggy and Zomato Deliveries

The Goods and Services Tax (GST) framework in India has undergone several transformations, many of which have significant implications for both businesses and consumers. Recently, the focus has turned to how food delivery platforms like Swiggy and Zomato are managing the increasing GST burden, which is ultimately passed on to consumers.

The GST Regime for Food Delivery Services

The introduction of GST for food delivery services in India was intended to simplify the tax structure and bring uniformity to various sectors. Under the GST system, online food delivery platforms, such as Swiggy and Zomato, are now categorized as e-commerce operators. This classification means that these platforms are liable to collect and pay GST for the services they provide. While restaurants themselves are already subject to GST, the additional tax burden on food delivery aggregators increases the cost for the end consumer.

Initially, GST on food delivery services was levied directly on the restaurant providing the food. However, following revisions by the GST Council, responsibility has shifted to food aggregators. The revised rules mandate that Swiggy and Zomato collect a 5% GST from consumers on behalf of the restaurant from which the food is ordered. This indirect taxation mechanism has created a ripple effect on pricing.

Impact on Consumers

The most visible impact of this change is the increase in the final price consumers pay when ordering food through delivery platforms. Before the GST Council's amendment, food delivery apps operated as intermediaries, with GST applied only to the restaurant's sales. Now, these platforms are effectively treated as "restaurants" from a tax perspective, leading to additional taxation layers. This increases the cost of food orders, especially for consumers who frequently use these platforms.

While the 5% GST seems nominal, for regular users of Swiggy and Zomato, the cumulative cost over time can be significant. As a result, food delivery becomes a more expensive option compared to dining at the restaurant or opting for takeaways, where GST rules differ slightly.

The Effect on the Food Delivery Ecosystem

The growing tax burden on food delivery platforms also has an indirect effect on the restaurant partners listed on these platforms. Many smaller restaurants, already facing operational and compliance challenges, find it difficult to absorb the extra costs, especially when combined with the commissions charged by food aggregators. This can affect their pricing competitiveness and customer retention.

On the other hand, food delivery platforms are becoming more cautious about maintaining their margins while trying to keep prices competitive. The current GST regime may compel platforms like Swiggy and Zomato to adjust their service charges, or explore other revenue models, which might ultimately pass on even more costs to consumers.

Potential for Future Reforms

There is a growing demand for a reassessment of the GST structure on food delivery services, especially considering the sector's importance to the urban economy. Some industry experts suggest that GST for food delivery platforms should be restructured to ensure that the tax burden is not disproportionately borne by consumers or restaurants. Reforming the GST applicable to food delivery services could help strike a balance, ensuring that businesses remain profitable while also protecting consumers from higher costs.

In conclusion, the revised GST system, while aimed at simplifying taxation, has created new challenges for the food delivery industry and its consumers. The increasing GST burden on food deliveries via platforms like Swiggy and Zomato is leading to higher prices for consumers, posing questions about affordability in the long term. If no action is taken to reform or mitigate these challenges, the growth trajectory of online food delivery services may face significant hurdles.