The GST Council is considering a reduction in the tax rate on online food delivery charges from the current 18% to 5%. This potential change could significantly impact companies like Zomato and Swiggy.This proposal, which may take effect from January 1, 2025, would disallow these platforms from claiming input tax credits.
Potential Impacts on Zomato and Swiggy:
Reduced Tax Burden: A lower GST rate would directly reduce the tax burden on food delivery charges, potentially leading to increased profitability.
Increased Consumer Demand: Lower prices for food delivery could stimulate demand, benefiting both the platforms and the restaurants they partner with.
Competitive Advantage: A reduced tax rate could provide a competitive advantage over traditional food delivery services that may not benefit from the same tax reductions.
Investor Sentiment: The potential tax cut could positively impact investor sentiment towards these companies, as it suggests a more favorable regulatory environment.
However, it’s important to note that:
No Tax Credit: The proposed reduction in the GST rate would not allow food delivery platforms to claim tax credits.
Other Factors: The overall impact on Zomato and Swiggy will also depend on other factors such as competition, economic conditions, and their ability to manage costs and increase revenue.