Will your pizza get cheaper? Food delivery sector asks for lower GST rates

Food delivery services have become an integral part of millennial households. Moreover, during the lockdown, these services were akin to essential services for many. As such, there are lot of expectations from the Union Budget 2021 for the food delivery sector.

As these services become inseparable from the day-to-day lives of millennials, they are always on the lookout for offers and coupons. But as food delivery platforms, offers and discounts can be extended only if there's elbow room for the same. Keeping in line with the sentiment, food delivery sector is looking forward to lowering of GST rates from 18 per cent to 5 per cent.

Customers of food delivery apps such as Swiggy and Zomato shell out 13 per cent more on the same food and beverages, compared to customers who walk down to restaurants and buy it from there, say industry officials.

Fooza Foods founder and managing director, Dibyendu Banerjea says that the online food delivery sector in India has grown and continues to do so by leaps and bounds. "It is currently worth $2.94 billion and is growing at a CAGR of 22 per cent. However, the tax complications arising due to the GST is likely to pose a roadblock to this growth," he added.

Banerjea says that the high GST rate of 18 per cent on food delivery service providers and ineligibility of credit of such GST charged to 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. Banerjea says that scalability of businesses will be impacted. "Growth plans via new franchise outlets for marquee restaurants will be less feasible. In comparison to the five per cent GST on food bills, the GST on royalty and franchise fee is 18 per cent," he said.

On the other hand, restaurateurs say that a high commission of 23-24 per cent by food delivery platforms have turned out to be a pain point, considering dine-in has not yet normalised after the lockdown.

Platter Hospitality director Shiladitya Chaudhury says, "With inability to raise prices, our bottomline is getting hit for higher commission fees despite sales reaching closer to pre-covid levels."

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