Food delivery sector demands to rationalize GST to 5% from 18%

The restaurants and food delivery sector has demanded that goods and services tax (GST) on home delivery of food be reduced to five per cent from 18 per cent to boost the $ 3 billion segment, shared officials.

Customers ordering food at home or office are paying 13 per cent higher price on the same food and beverages compared to customers who are walking down to restaurants as the dine-in tax rate is 5 per cent, they pointed.

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"The online food delivery sector in India has been growing by leaps and bounds. It is currently worth $ 2.94 billion and is growing at a CAGR of 22 per cent. However, the tax complications arising due to the GST is likely to pose a roadblock to this growth," said Dibyendu Banerjea, Founder & MD, Fooza Foods told PTI.

"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 have an adverse impact 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," he added.

However, restaurateurs said a high commission of 23-24 per cent 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 normalised.

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"For us, post Covid lockdown our home delivery sales got revered to 60 per cent which was 40 per cent earlier. With inability to raise prices, our bottom line is getting hit for higher commission fees despite sales had reached closer to pre-covid levels," added Shiladitya Chaudhury, Platter Hospitality to PTI.

However, he remained optimistic that after a few months once vaccination reaches the mass, the dine-in customers will return.