Most companies are yet to come to terms with the new tax rates. Only one or two have it sorted.
After the rollout of GST on July 1, the food tech industry has been shrouded in uncertainty. While some services aren’t clear on what tax slab they fall under, some have been allegedly charging “variable GST rates” and some others are said to have “doubled” prices of items on their menu. Several customers have shared posts and bills on social media claiming one or all of the above. Some have even said that their orders were cancelled because of “GST problems”.
Food-tech companies such as Swiggy, Zomato, FreshMenu, and others are yet to come to terms with the new tax reform. One food startup founder told BGR India that “everyone is waiting for the first tax filing” (on July 15) to fully understand the impact of GST on the industry. ALSO READ: UberEATS food delivery service launched in India, takes on Zomato and Swiggy
It is not clear whether these companies fall under the same GST slab as e-commerce companies like Amazon and Flipkart. If yes, they would charge customers 12 percent GST (6 percent Central GST + 6 percent State GST) on their food bills. However, some customers claimed that Swiggy had charged 18 percent GST (the AC restaurant rate) on certain orders. While on some other orders, no GST was charged.
Ordering food home has actually become costlier by 3.5% after GST.
Pic 1: Pre GST – Only 14.5% VAT.
Pic 2: Post GST – 18% GST. pic.twitter.com/U9ZqDTdxyE— Aditya (@forwardshortleg) July 2, 2017
A friend of mine just got a 20.5% GST on a Swiggy order (he’s not on Twitter) when the rate is 18% pic.twitter.com/sHsC0lGxpC
— Madhu Menon (@madmanweb) July 2, 2017
My @swiggy_in order got cancelled because of “GST problems”. #GST ruining everything.
— Harini Rajagopalan (@Harini1308) July 2, 2017
Ordered breakfast through swiggy from murugan idly, got a call requesting to cancel the order since they have issues with gst billing!
— Sreekumar (@cheeku_n) July 2, 2017
A Swiggy spokesperson told BGR India that she “will revert in case we have an official statement” on the GST rollout. However, the food aggregator said that it was making its best efforts to get its vendors and restaurants GST-ready. “Swiggy’s partner relationship teams are taking numerous steps to support and ensure that restaurants on the platform are GST ready. Right from hosting webinars and in-person seminars, to sharing insights through FAQ documents, we have implemented multiple touch points for them,” said the spokesperson. BGR India has also reached out to Zomato, UberEATS and Faasos for comment.
Many small vendors with low turnovers have reportedly delisted themselves from food delivery apps in order to avoid being charged 2 percent TCS (tax collected at source) by them. That is an additional tax burden they don’t want to take. Thus, the likelihood of more local eateries coming online will come down. Food tech companies are believed to be lobbying with the government on the issue of TCS through the Federation of Indian Chambers of Commerce and Industry (FICCI). ALSO READ: GST Impact: India’s e-commerce industry will mostly gain from the new reform
Some food startups, however, seem to have sorted out the GST issue. Mumbai-based Holachef is charging 12 percent GST on its orders and has revised prices on the menu. The company says that it has already seen more items being sold at the same ticket size. “Earlier customers would have to pay about 15 percent VAT on their orders. Now, they can order more for the same price because we’re charging them 12 percent GST,” Saurabh Saxena, Founder-CEO, Holachef tells BGR India. “The difference is marginal but it has benefited people,” he adds.
The food-tech industry has had it tough in the past 1-2 years with over 20 startups going out of business. It is only in the last 3-4 months that close to $700 million of fresh capital has been pumped into the sector which is estimated to cross the billion-dollar mark by 2020. Only time will tell whether GST is a deterrent or an enabler.