GST Shake-up: Food Delivery Faces Cost Hikes, QSRs to Reap Benefits

The recent overhaul in Goods and Services Tax (GST) rules has stirred up the food services sector, leaving food delivery platforms facing increased costs, while Quick Service Restaurants (QSRs) are likely to profit from tax cuts. According to a report by Bernstein, local delivery services facilitated by Electronic Commerce Operators (ECO) now fall under new GST norms, targeting mainly gig workers who were not previously liable for GST registration.

Food delivery charges, previously exempt from GST and making up 10-20 percent of platform revenues, are now subject to an 18 percent tax. The Bernstein report indicates these platforms, now under the 18 percent tax bracket, may internally absorb the cost hike or pass it partially to restaurant partners.

Other fees such as platform, handling, and surge charges already incur an 18 percent GST and remain unchanged. In contrast, QSR chains are set to benefit significantly from GST cuts on key inputs like cheese, packaging, and condiments. Without input tax credit, these GST rate drops directly enhance gross margins, potentially improving organized players' margins by 70-80 basis points. The impact for others could range from 20-40 basis points due to a smaller share of affected inputs in their costs. The report concludes that while delivery platforms might struggle with rising delivery fees, QSRs stand to enhance profitability, likely translating to consumer benefits through increased sales volumes. (ANI)