Restaurants increase prices on Zomato, Swiggy after tax burden rises

Online food companies which have been thriving in metros and medium cities like anything, recently, are now in a precarious condition, since you will get it on 13 per cent less price at the outlet than at your home. The new GST regime charges you at eating outlets to 5% from 18% in November 2017. It was made possible by the withdrawal of input tax credit (ITC) for restaurant owners.

Surprisingly, a number of restaurants have increased the prices of food items, which are ordered as a parcel service. Moreover, some of them have also increased the rates of items on the online delivery services to make up for the additional costs.

It is an open fact that online delivery services portal like Swiggy, Zomato and Foodpanda charges about 20 per cent for online delivery services to restaurants. They charge flat 18% GST for online delivery. In the changed scenario, restaurants cannot claim ITC on the 18% GST for the input services. The tax complication is such that the restaurants are forced to hike prices on their menu. This is because they face an additional cost burden on the products.

Swiggy is at the top of these portals, which delivers 450,000 orders a day. It has requested the government for a rate reduction in the regime of 5%.

A big online food delivery player has clarified that they had been under pressure from restaurants to cut margins by less than three per cent. On the other hand, restaurants are increasing prices on their own.

It is estimated that more than one lakh restaurants are working in joint ventures with online delivery platforms. A few of them are so popular that about 70 per cent of their sales are made through these platforms.

Swiggy has dealings with 35,000 restaurants across around 15 important cities in India. Swiggy recently depended on its new service Swiggy POP. It offers a curated menu of single-serve meals in the range of Rs 99- 200 from nearby restaurants.

UberEats, Ola and Zomato are the other food tech majors. In March 2018, food delivery in India had grown by 48 per cent.