Demand to rationalise GST on food delivery business to 5%

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

Customers taking food delivery at their home or office are paying 13 per cent 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 per cent, 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 per cent. 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 per cent 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 per cent 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 per cent which was 40 per cent 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 per cent GST on food bills, the GST on royalty and franchise fee is 18 per cent," Banerjea said.