After the Goods and Services Tax (GST) was cut to five percent from 18 percent and input tax credit provision was taken away from restaurants last November, the eateries are now hiking food prices online delivery platforms report Business Insider. Thus, companies like Zomato, Swiggy and Foodpanda have seen a price hike in food items.
High Charges For Delivered Food
The report further says that while some restaurants have straight up hiked prices, some are negotiating the commission cut so that the additional cost of 3.5 percent due to cancellation of input tax credit (ITC) facility can be made up. The various online delivery platforms offered food deliveries from restaurants at a commission of 20 percent on which the GST of 18 percent was levied. Now ITC cannot be claimed on the GST leading to the price hikes. “These online food delivery companies have represented for a rate reduction or to allow ITC to restaurants. The matter is being discussed,” said a government official while speaking with Business Insider.
Meanwhile, Swiggy has approached the government and requested rate reduction to five percent says the report. The restaurants are asking for a margin cut of three to four percent, a senior executive of a big food delivery company told the publication. “We do not have an exact number but many restaurants are slowly increasing the prices on online delivery platforms, which is a setback,” he added.
“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 could have an adverse impact on growth of the sector,” a Swiggy spokesperson told Business Insider. He also added that GST reduction will make the food costs affordable along with job creation in the sector and in the long run benefitting the government’s initiative of Digital India.