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Online food delivery platforms have been reeling under extreme challenges ever since restaurant owners decided to increase the rate of food items on delivery services after Goods and Services Tax at food outlets was reduced to 5 per cent from 18 per cent in November 2017.
The cut in GST was also accompanied by the withdrawal of input tax credit (ITC).
According to a Business Standard news report, restaurants after increasing the rate of food items have also began negotiating commissions with online delivery services.
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This has set alarm bells ringing for the likes of Zomato, Swiggy and Foodpanda, who are the leading online food delivery platforms. They operate on 20 per cent commission on the delivery, on which they are levied 18 per cent GST.
Food delivery services are taxed at 18 per cent, which the restaurants have to pay. Since its withdrawal, the ITC on the 18 per cent GST for the input services from the delivery platforms cannot be claimed by restaurants.
As per media reports, the tax complication is compelling restaurants to hike prices on their menu to make up cost for operations, as they face an additional cost burden.
The online food delivery platform has reportedly approached the government for rate reduction or to allow ITC to restaurants. As per the Business Standard report, the government is discussing the matter.
Online food delivery platforms have partnership with over 100,000 restaurants and constitute over 70 per cent of their orders. A tussle between restaurant owners and online food delivery platform raises concerns over the impact it may have on the ever-growing food industry.
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