The Goods and Services Tax (GST) Council is expected to reduce the GST on food delivery charges by e-commerce platforms like Zomato and Swiggy to 5%, down from the current 18%. This tax adjustment, recommended by the Fitment Committee, is likely to be implemented from January 1, 2022.
This change could make food delivery services more affordable for consumers, aligning delivery charges with GST rates on restaurant services.
Impact on E-Commerce Platforms
While the proposed tax cut benefits consumers, it comes with a trade-off for food delivery platforms. Sources indicate that the lower GST rate would disallow these platforms from claiming input tax credits, potentially increasing their operational costs. Despite this, the platforms had earlier requested a tax reduction to create parity with restaurant services.
Stock Market Performance of Zomato and Swiggy
The announcement has already reflected in market sentiment:
- Zomato shares rose by close to 1% in early trade on December 17 and have surged 136% year-to-date.
- Swiggy shares dipped slightly after opening but have gained 38% since their listing in November 2024.
Axis Capital has initiated coverage on Swiggy with a “Buy” recommendation, projecting a 20% upside and a target price of Rs 640 per share.
Consumer and Market Trends
Zomato and Swiggy have been focused on enhancing delivery times and improving customer experiences. Initiatives like Swiggy’s rapid delivery service, Bolt, and Zomato’s expansion in restaurant availability reflect growing competition and consumer demand for speed and convenience.
Swiggy has also introduced premium memberships like “One BLCK,” offering faster deliveries and exclusive benefits. Similarly, Zomato has reported increased platform consumption as delivery times decrease.
