Jan 18, 2021
The restaurants and food delivery sector has asked the government to reduce their goods and services tax (GST) on home delivery of food to 5% from 18%, Citing that this drop will boost the $3 billion segment.
This is because the customers are paying 13% higher price for taking food delivery at their home or office is on the same food and beverages compared to customers who are walking down to restaurants as the dine-in tax rate is 5%.
The online food delivery sector in India is emerging as one of the top-notch industry. It is currently worth USD 2.94 billion and is growing at a CAGR of 22 %. Yet, the tax difficulties rising due to the GST is likely to pose an obstruction to this growth.
The high GST rate of 18 % on online food delivery can have a hostile effect 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.
However, restaurateurs said a high commission of 23-24% by food delivery platforms has turned out to be a pain point even for several months of reopening after lockdown, footfall for dine-in had not normalized.
However, restaurateurs said a high commission of 23-24% by food delivery platforms has turned out to be a pain point even for several months of reopening after lockdown, footfall for dine-in had not normalized.
For restaurants, post-Covid lockdown our home delivery sales got revered to 60% which was 40% earlier.
The scalability of business will be the most impacted. Growth plans via new franchise outlets for marquee restaurants will be less feasible. In comparison to the five % GST on food bills, the GST on royalty and franchise fee is 18 %.