Swiggy, Zomato brace for GST impact on delivery fees; may pass cost to consumers

Swiggy, Zomato brace for GST impact on delivery fees, may pass cost to consumers

Food delivery majors Swiggy and Zomato are bracing for a GST impact, as new rules make them liable for taxes on local delivery services routed through their platforms. The duo is already weighing the possibility of passing the additional cost on to consumers to offset the impact on their margins, sources close to the companies told Moneycontrol.

Platforms are still studying the notification to gauge its impact on margins, pricing, and working capital.

Legal experts, meanwhile, note that food delivery firms are likely to feel the pinch more directly, since delivery is their core service, unlike in quick commerce or e-commerce, where it is treated as ancillary to goods supply.

However, members of the duo’s subscription plans, Swiggy One and Zomato Gold, may not be directly impacted, as these are considered value-added services.

The Goods and Services Tax (GST) Council, in its 56th meeting recently, said that platforms will now be liable for GST on local delivery services routed through them under Section 9(5) of the CGST Act. The move is aimed at clarifying tax liability for services supplied through platforms, while small delivery agents remain outside the GST compliance scope.

“We are still awaiting more clarity on this, but if the GST burden on delivery services is high, it will likely be passed on to customers. The impact may vary across categories, as consumers tend to adjust their spending based on what they have in hand,” an executive at a food delivery firm said.

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Local delivery services were already taxed at 18 percent with Input Tax Credit, but the new notification explicitly brings platform-based deliveries under Section 9(5), creating a clear liability for companies that had previously argued that delivery fees paid to unregistered gig workers were outside GST rules.

“This amendment ensures that e-commerce companies would become liable to discharge GST on such delivery charges too,” said Sudipta Bhattacharjee, Partner at law firm Khaitan & Co. He added that while gig workers remain outside the compliance burden, the change could still raise delivery charges and reporting requirements for platforms.

The move comes against a backdrop of high-profile tax disputes. In December 2024, Zomato received a notice from GST authorities demanding Rs 803 crore in unpaid tax, including penalty and interest, for 2019–2022, while Swiggy had earlier been served a Rs 327 crore pre-demand notice.

Salman Waris, Partner at Techlegis Advocates and Solicitors, said the change eases compliance for small delivery partners but increases the financial and administrative load on platforms. “Even if they don’t charge separately for delivery, GST outflow will rise, and margins may come under pressure,” he said

Beyond compliance, the new rules could mean a significant tax outgo. “With an estimated Rs 180–200 crore annual hit and no input credit allowed, margins are under pressure. Platforms will likely revisit pricing, delivery charges, and partner payouts,” said Alay Razvi, Managing Partner at Accord Juris.

Regardless, industry executives say they are still assessing the operational and financial impact.

“The GST may affect working capital, as platforms could have bought services or inventory at higher input costs and may now need to sell at lower effective costs. If the tax cannot be fully recovered from customers, it could push up delivery charges,” said an executive at a large grocery delivery platform.

The government’s move is aimed at plugging tax leakages, but its rollout will need to be carefully managed. Legal experts added that the impact is likely sharper for food delivery players, since e-commerce and quick commerce companies usually treat delivery as an add-on to goods supply.

“This decision does not extend to platforms like Amazon, Flipkart, or Blinkit, where delivery is ancillary to goods supply rather than a stand-alone service,” said Ankit Jain, Partner, Ved Jain and Associates.

Bhattacharjee of Khaitan & Co pointed to similar disputes in the ride-hailing sector, where platforms faced prolonged ambiguity over GST liability.

“Several requests for clarification from the GST authorities went unanswered, which created uncertainty for platforms,” he said, warning that delivery firms could see comparable issues under Section 9(5).

As Swiggy and Zomato prepare for the shift, the notification underscores the government’s broader push to tighten accountability in India’s fast-growing e-retail sector. While the intent is to simplify compliance for gig workers and plug tax gaps, platforms will need to carefully manage implementation to balance operational realities, margins, and the impact on customers.