A recent overhaul of India’s Goods and Services Tax (GST) system, effective September 22, will see a new 18% GST levied on online delivery services. The GST Council’s decision brings local e-commerce delivery services under Section 9(5) of the CGST Act, which means companies like Zomato and Swiggy will now be responsible for paying GST on the delivery fees they charge customers.
This change is expected to increase the cost of online food and quick commerce orders for consumers. Analysts from Morgan Stanley have estimated the impact per order:
- Zomato: A potential increase of around ₹2 per order, raising the delivery fee from approximately ₹11-12 to ₹14.5.
- Swiggy: The estimated delivery fee will rise to approximately ₹14.5 per order, leading to a potential impact of ₹2.6.
- Swiggy Instamart: The average delivery fee is about ₹4, with a potential impact of ₹0.8 per order.
- Blinkit: No new incremental impact is expected as the delivery fee was already attracting GST.
For the platforms, this new tax is estimated to create an additional annual GST liability of ₹180-200 crore for each company. While this adds a new cost, both Zomato and Swiggy are expected to pass this burden on to customers. The move also provides much-needed clarity on the taxability of delivery services, which may help resolve existing legal disputes with state governments.