Why Zomato, Swiggy Deliveries To Cost More As 18% GST Kicks In, But McDonald’s & Domino’s Set To Gain?

Ordering food online could soon get more expensive amid changes in Goods and Services Tax (GST) rules. A new report by brokerage Bernstein has highlighted that delivery charges, which were earlier tax-free, will now fall under the 18 per cent GST bracket.

The report explained, “Delivery charges, which account for 10–20 per cent of revenue for food delivery platforms, were previously exempt from GST but will now fall under the 18 per cent tax bracket.”

Delivery Charges Now Taxable

This change applies to local delivery services carried out through Electronic Commerce Operators (ECOs), particularly when delivery partners are not registered under GST.

According to Bernstein, “Food delivery platforms, which were so far exempt from GST, will now come under the 18 per cent bracket. This impact may be absorbed completely or could be shared partially with restaurant partners.”

Other charges, such as platform fees, handling charges, and surge fees, were already taxed at 18 per cent, so they will not be affected by the change.

Also Read: Home-Cooked Meals Get Cheaper! Veg Thalis Down 7% & Non-Veg 8% In August

QSR Chains on the Winning Side

While delivery apps may struggle with higher costs, Quick Service Restaurants (QSRs) like McDonald’s, Domino’s, and Pizza Hut stand to gain from GST rationalisation.

Bernstein noted, “QSR chains are expected to gain directly from GST rationalisation on inputs such as cheese, packaging materials, condiments (including sauces), butter, ghee, and margarine.”

Since QSRs cannot claim input tax credits, any GST levied on raw materials is treated as a direct expense. Lower taxes on these items will immediately boost profitability.

The report estimated, “With the GST reduction, gross margins for organised players could improve by around 70–80 basis points. For other organised players, the margin improvement is likely to be in the range of 20–40 basis points.”

Impact on Consumers

The big question now is whether food delivery platforms will absorb the higher costs or pass them on. If the latter happens, customers could soon notice higher delivery charges on their bills.

At the same time, Bernstein suggested that QSRs might share some of their gains with consumers. “Some of the benefits may eventually be passed on to consumers to drive higher sales volumes,” the report concluded.

For customers, the impact is two-sided; delivery fees may rise, but discounts from QSR chains could offset part of the increase.