Food Delivery Sector Demands to Rationalise GST to 5 Percent From 18 Percent

The restaurants and food delivery sector has demanded that goods and services tax (GST) on home delivery of food be reduced to five percent from 18 percent now to boost the USD 3 billion segment, industry officials said.

Customers taking food delivery at their home or office are paying 13 percent higher price on the same food and beverages compared to customers who are walking down to restaurants as the dine-in tax rate is 5 percent, they claimed.

“The online food delivery sector in India has been growing by leaps and bounds. It is currently worth USD 2.94 billion and is growing at a CAGR of 22 percent. However, the tax complications arising due to the GST is likely to pose a roadblock to this growth,” Fooza Foods founder and managing director, Dibyendu Banerjea told PTI. “The high GST rate of 18 percent on online food delivery service providers and ineligibility of credit of such GST charged to the restaurants have an adverse impact on the growth of the sector. A reduction in GST rates will keep food costs affordable and create more jobs in the sector while furthering the government’s initiatives,” he said.

However, restaurateurs said a high commission of 23-24 percent by food delivery platforms have turned out to be a pain point even for several months of reopening after lockdown, footfall for dine-in had not normalized. “For us, post-Covid lockdown our home delivery sales got revered to 60 percent which was 40 percent earlier. With the inability to raise prices, our bottom line is getting hit for higher commission fees despite sales had reached closer to pre-covid levels,” Platter Hospitality director Shiladitya Chaudhury said.

However, he remained optimistic that after a few months once vaccination reaches the mass, the dine-in customers will return. “Scalability of business will be most impacted. Growth plans via new franchise outlets for marquee restaurants will be less feasible. In comparison to the five percent GST on food bills, the GST on royalty and franchise fee is 18 percent,” Banerjea said.

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