The restaurants and food delivery sector has demanded that goods and services tax (GST) on home delivery of food be reduced to 5% from 18% now to boost the $3 billion segment, industry officials said.
Customers taking food delivery at their home or office are paying 13% 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%, 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 %. 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 said.
“The high GST rate of 18 % 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% 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 normalised.
“For us, post-Covid lockdown our home delivery sales got revered to 60% which was 40% earlier. With inability to raise prices, our bottomline 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 % GST on food bills, the GST on royalty and franchise fee is 18 %,” Mr. Banerjea said.
