Food delivery giants Zomato and Swiggy are bracing for an annual goods and services tax outgo of Rs 180–200 crore each after the GST Council clarified that platforms must pay 18% tax on delivery fees. The decision ends a long-running dispute over whether aggregators or gig workers were liable, but it also raises costs for an industry already struggling with slowing growth.
Executives at both firms told ET that the additional tax will not be absorbed by the companies. Instead, the burden is likely to be shared between delivery workers, whose payouts could be trimmed, and customers, who may face a new delivery levy. “This will immediately reduce partner earnings and in parallel, a charge to consumers is being considered,” said a senior Zomato executive, requesting anonymity.
The ruling follows earlier run-ins between tax authorities and the platforms. In December 2024, Zomato received a notice for Rs 803 crore in unpaid GST, interest, and penalties for 2019–22. Swiggy too was issued a pre-demand notice. How the latest clarification will impact these past claims remains unclear.
Brokerages see the change as a negative in the near term. Morgan Stanley noted that the 18% GST on local delivery services will now apply whether firms account for it as revenue or as pass-through, but added that companies are well-positioned to shift the cost to users.
The development comes amid muted growth in online food delivery. Gross order value has been expanding below 20% year-on-year for both players in recent quarters, far slower than earlier years. For April–June, Zomato posted an operating profit of Rs 451 crore, while Swiggy’s food business reported Rs 192 crore.
Section 9(5) of the GST Act already obliges platforms to collect tax on behalf of restaurants. The latest interpretation now firmly brings delivery services into the net.
