Restaurants Sector Demands GST Reduction on Food Delivery Services

The restaurants and delivery sector has demanded to reduce the Goods and Services Tax (GST) on home delivery of food. The demand is to reduce the GST rate to 5% from 18% to boost the USD 3 billion segment.

The industry claims that the customers taking food delivery at their home or office pay 13% more GST on the same food and beverages than the walk-in customers as the dine-in GST rate is 5%.

The Fooza Foods Founder and Managing Director, Mr Dibyendu Banerjea told that India’s online food delivery sector has been growing currently worth USD 2.94 billion and is growing at a Compound Annual Growth Rate (CAGR) of 22%. However, the GST complications are likely to pose a roadblock to this growth.

He also said that the high GST rate of 18% on online food delivery service providers and not allowing GST paid as Input Tax Credit (ITC) hurt the sector’s growth. The reduction in GST rates will keep food costs affordable and create more jobs in the sector while furthering the government’s initiatives.

Also Read: Gujarat AAR: Leaving Job Without Serving Notice Period Attracts 18% GST

Mr Dibyendu Banerjea also said that the scalability of business would be most impacted. The growth plans via new franchise outlets for restaurants will be less feasible as the GST on royalty and franchise fee is 18%, and the GST on food bills is 5%.

However, restaurants said that a high commission of 23% to 24% by food delivery platforms has turned out to be a pain point even for few a months of reopening after lockdown as the footfall for dine-in had not normalised.

Platter Hospitality director Shiladitya Chaudhury said that the home delivery sales increased to 60% post-COVID lockdown, 40% earlier. However, their bottom line is getting hit due to higher commission fees, even though sales had reached closer to pre-COVID levels. Also, he remained hopeful that once vaccination reaches the mass, the dine-in customers will return within a few months.

The industry hopes that the government will consider reducing the GST rate on food delivery service to boost the sector. The government might also consider factors such as the revenue and creation of jobs while deciding in this regard.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in

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