In recent years, food delivery startups like Swiggy and Zomato have revolutionized the way Indians order food. With the convenience of online platforms, consumers can enjoy their favorite meals delivered right to their doorstep.

However, the implementation of the Goods and Services Tax (GST) has introduced new dynamics into this thriving industry. Understanding the impact of GST on Swiggy and Zomato is crucial for both consumers and businesses navigating this evolving landscape.

Understanding GST and Its Applicability

GST is a comprehensive indirect tax levied on the supply of goods and services in India. It replaced multiple cascading taxes imposed by the central and state governments. The introduction of GST aimed to simplify the taxation system and unify the Indian market.

GST on Swiggy and Zomato specifically affects how these platforms operate financially. As intermediaries between restaurants and customers, they are now responsible for collecting and remitting GST, which has implications for pricing, revenue, and compliance.

Also Read: Virtual office of GST Registration

GST Rate Changes for Food Delivery Services

Initially, restaurants were charging GST based on their establishment type:

Non-AC restaurants: 5% GST
AC restaurants: 18% GST
Restaurants with liquor licenses: 18% GST

However, with the Goods and Services Tax (GST) Council’s decision effective from January 1, 2022, food delivery apps like Swiggy and Zomato are required to collect 5% GST from customers on behalf of the restaurants, regardless of the restaurant’s GST registration status.

How Swiggy and Zomato Are Affected

Compliance Responsibility
The shift means GST on Swiggy and Zomato increases their compliance burden. They must ensure accurate tax collection and remittance to the government, adhering to stringent reporting and filing requirements.
Operational Adjustments
- Technology Upgrades: Both platforms had to update their systems to incorporate GST calculations at the point of sale.
- Training Staff: Teams needed training to manage the new tax processes effectively.
Financial Implications
The platforms are not expected to absorb the GST costs entirely. Instead, the tax is passed on to consumers, potentially increasing the final bill amount.

Impact on Restaurants

Simplified Taxation
For unregistered or small restaurants, GST on Swiggy and Zomato simplifies the taxation process since the platforms handle GST collection and remittance.
Pricing Strategies
Restaurants must adjust their pricing to remain competitive while factoring in the GST implications.

Impact on Consumers

Increased Costs
Consumers may notice a slight increase in food prices due to the addition of 5% GST on their orders placed through Swiggy and Zomato.
Transparency
The tax component is now clearly displayed during checkout, making the billing process more transparent.

Comparison Before and After GST Implementation

To understand the financial impact, consider the following comparison:

Table: Cost Analysis Before and After GST on Swiggy and Zomato

Particulars	Before GST (INR)	After GST (INR)
Food Order Value	500	500
Restaurant Charged GST (5%)	25	–
Swiggy/Zomato Charged GST (5%)	–	25
Total Bill Amount	525	525

Note: The total bill amount remains the same; however, the responsibility of GST collection shifts from the restaurant to the food delivery platforms.

Benefits of GST on Swiggy and Zomato

Uniform Taxation
The uniform 5% GST rate eliminates confusion over varying tax rates based on restaurant types, simplifying the tax structure for food delivery services.
Regulatory Compliance
Ensuring GST on Swiggy and Zomato brings more transactions into the formal economy, increasing tax compliance and revenue for the government.
Enhanced Transparency
Customers receive clear invoices with GST details, fostering trust in the billing process.

Challenges Faced by Swiggy and Zomato

Increased Administrative Work
Managing GST compliance for thousands of restaurant partners adds to the administrative workload for these platforms.
Technology Integration
Implementing the necessary technological changes to handle GST calculations accurately required substantial investment and development time.
Partner Coordination
Educating and aligning restaurant partners with the new GST framework demanded significant effort from Swiggy and Zomato.

Strategic Responses by Swiggy and Zomato

Customer Communication
Both platforms proactively communicated changes to customers, explaining the GST on Swiggy and Zomato and its implications on pricing.
Restaurant Support
They provided resources and support to help restaurant partners adapt to the new tax responsibilities.
Promotional Offers
To mitigate the impact on order volumes due to potential price increases, Swiggy and Zomato offered promotional discounts and loyalty programs.

Also Read: GST Returns Filing

Future Outlook

The implementation of GST on Swiggy and Zomato sets a precedent for the regulation of digital platforms in India. It reflects the government’s approach to adapting tax policies in line with the evolving digital economy.

Potential for Increased Tax Revenue
With better compliance and a broader tax base, the government may witness increased GST collections from the food delivery sector.
Emergence of Best Practices
Swiggy and Zomato’s handling of GST can serve as a model for other digital service providers in managing tax compliance efficiently.

Conclusion

The introduction of GST on Swiggy and Zomato has significant implications for all stakeholders in the food delivery ecosystem.

While it presents challenges in terms of compliance and operational adjustments for the platforms, it also offers benefits like simplified taxation and increased transparency.

Consumers may experience minor cost increases, but the uniform tax structure aims to streamline the overall experience.

Understanding the impact of GST on Swiggy and Zomato is essential for navigating the changing landscape of food delivery services in India. As the industry continues to evolve, stakeholders must stay informed and adaptable to regulatory changes that shape the market dynamics.

By staying abreast of these developments, businesses and consumers alike can make informed decisions and continue to enjoy the convenience and variety offered by platforms like Swiggy and Zomato.

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Impact of GST on Food Delivery Startups: Swiggy, Zomato, and More

Shabana A

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