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Restaurants hike prices on Zomato, Swiggy after tax burden increases

Online food delivery startups face a challenge form restaurants after GST payable at eating outlets was cut to 5% from 18% in November 2017, accompanied by the withdrawal of input tax credit (ITC) for restaurant owners. Following the tax cut, restaurants have hiked prices of food items on delivery services, they are also negotiating commission cuts with online delivery services to make up for the additional costs. This development was first reported by Business Standard. Swiggy, Zomato and Foodpanda provide online delivery services to restaurants at a commission of around 20%, on which they are levied 18% GST. Restaurants can no longer claim ITC on the 18% GST for the input services from these delivery platforms. The tax complication is compelling restaurants to hike prices on their menu, as they face an additional cost burden. “These online food delivery companies have represented for a rate reduction or to allow ITC to restaurants. The matter is being discussed," a government official told Business Standard. Swiggy, which caters to more than half the market and delivers 450,000 orders a day, has approached the government for rate reduction to 5%. A senior executive of a major online food delivery player told Business Standard that they had been under pressure from restaurants to cut margins by 3-4%. Meanwhile, restaurants hiked prices displayed on the platforms on their own. “We do not have an exact number but many restaurants are slowly increasing the prices on online delivery platforms, which is a setback,” he added. Over…

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