GST Blow: Lakhs Of Delivery Workers Likely To Be Hit As Zomato, Swiggy Stare At Rs 400 Crore Tax Outgo

Food delivery partners are set to be hit the most due to a goods and services tax rate rejig as Eternal Ltd. and Swiggy Ltd. face a GST outgo of up to Rs 400 crore annually.

Both Eternal and Swiggy are said to be in active discussions about how to pass on the tax hit, with both companies seeing lesser payouts to delivery workers as the best available option, people with direct knowledge of the matter told NDTV Profit.

Currently, Zomato claims to have a network of 3.5 lakh delivery partners, while Swiggy claims to have over 5.2 lakh.

Some impact of the goods and services tax hit is also likely to be passed on to consumers, but the platforms are not keen on this option especially after the recent round of platform fees hikes, one of the abovementioned persons added.

NDTV Profit has reached out to both Swiggy and Zomato for comments on the story.

To add some context, the new GST Council clarification mandates that online marketplaces must pay an 18% GST on delivery fees collected on behalf of gig workers, who were previously exempt from GST compliance.

This resolves a persisting dispute in the food delivery industry over who should pay taxes on fees passed to gig workers — the platform or the gig workers themselves. Earlier, platforms claimed that these fees were not part of their revenue, since gig workers were unregistered and fell outside the ambit of GST rules. But the government's clarification on making delivery a taxable service implies that the tax obligation lies with the platforms.

"GST liabilities on platform-based deliveries will likely result in up to a Rs 200 crore annual hit on Swiggy and Zomato each," explained Shobit Singhal, research analyst at Anand Rathi Institutional Equities. "If passed on to the consumer, daily volumes for both platforms are likely to take a hit, especially after the recent round of platform fees hike."

In December last year, Zomato was issued an order by the Maharashtra tax authority to pay pending goods and services tax dues of Rs 401 crore, along with a penalty of Rs 401 crore.

The order was issued over alleged "non-payment of GST on delivery charges with interest and penalty thereon." The company had noted that it would be challenging the order issued by the tax authority.