Zomato, Swiggy plan to pass new GST costs to customers, delivery partners: Report

Food delivery companies Zomato and Swiggy will each face an additional ₹180-200 crore annual GST liability after the GST Council mandated 18% tax on delivery services under Section 9(5). Food delivery majors Zomato and Swiggy will each face an additional tax burden of ₹180-200 crore annually, reported The Economic Times on Friday, after the GST Council clarified that online marketplaces must pay 18% tax on delivery fees, which was previously outside the ambit of goods and services tax. According to the report, executives at both companies said they intend to pass on the incremental tax. GST Council on Wednesday decided that supply of local delivery services through electronic commerce operators (ECOs) will be taxed at 18% under Section 9(5) of the CGST Act. Delivery of food is categorised as a service and already attracts 18% GST. The government has argued that since platforms levy service fees for delivery, the tax obligation rests with them. “This will be partly passed on to delivery workers and will likely reduce their earnings in the immediate term… but there is also a plan under consideration to charge a levy to consumers,” ET quoted a senior executive at Eternal-owned Zomato as saying. A Swiggy executive also confirmed the company plans to transfer the tax burden, the paper said. Since January 2022, Zomato and Swiggy have been required to collect and remit GST on behalf of restaurants, but the treatment of delivery fees had remained ambiguous. Platforms contend that delivery charges collected from users are typically passed on to gig workers, and in some cases, the fees charged to customers are lower than payouts to partners. Meanwhile, both companies have hiked platform fees in tandem ahead of India’s festive season to offset rising costs. Swiggy, based in Bengaluru, has raised platform fees three times in as many weeks to ₹15 per order inclusive of GST, while Gurugram-headquartered Zomato has increased fees 20% to ₹12 per order before GST. With nearly 20 lakh orders a day, Swiggy now stands to earn about ₹3 crore daily from platform fees. Zomato, which handles 23–25 lakh orders a day, will generate a similar amount.