India's food delivery and quick commerce companies are staring at higher costs after the GST Council decided to impose an 18% tax on delivery fees under the new Goods and Services Tax (GST) slabs.
The move, announced by Finance Minister Nirmala Sitharaman, will apply from September 22. It brings delivery services offered by platforms such as Swiggy, Zomato and Blinkit under Section 9(5) of the CGST Act.
"Local delivery services to be notified under section 9(5) of the CGST Act in cases where the person supplying such services through an electronic commerce operator is not liable for registration under GST. The applicable rate on such services to be 18%," the 56th Meeting of the GST Council's recommendation read.
Notably, until now, delivery charges were treated as pass-through costs and kept outside GST.
The change will add about INR 2 per order for Zomato, where delivery fees average INR 11-12. Swiggy could see a higher impact of INR 2.6 per order, given its delivery fees average INR 14.5. However, the actual impact will vary according to each order as delivery fees change with distance and also differ for those consumers using loyalty programmes.
Reportedly, Swiggy's grocery arm Instamart is also likely to face a smaller hit of INR 0.8 per order, while Blinkit may escape additional costs since its delivery fees already attracted 18% GST.
The notification also provides clarity on past disputes. Platforms have faced multiple tax demands from states over unpaid GST on delivery services. With the new rule, the government has closed this gap and brought uniformity to the sector.
While quick commerce and food delivery will become costlier for consumers, the new rules are also likely to apply to at-home services such as those offered by Urban Company, Snabbit, Pronto and others.
The Long List Of GST Demands
Food delivery platforms have faced repeated tax disputes in the past over whether GST should apply to delivery charges. In December 2024, Zomato received a demand notice of around INR 803 Cr from Maharashtra's GST department for the period between October 2019 and March 2022, with the company arguing that delivery fees were collected on behalf of gig workers.
Earlier, in August 2024, Zomato was served a notice of INR 4.59 Cr by authorities in Tamil Nadu and West Bengal for non-payment of GST and excess input tax credit claims, adding to a series of similar notices since late 2023.
Its parent company, Eternal, was also hit with three tax orders from Bengaluru authorities seeking over INR 40 Cr for services provided between July 2017 and March 2020.
In September 2024, DGGI's Pune zonal unit also issued a demand notice to Swiggy for INR 326.7 Cr in alleged GST liabilities, related to unpaid taxes on delivery fees collected from customers.