The move could reduce costs for consumers ordering food delivery via e-commerce platforms. Credit: CC7 / Shutterstock.

India’s tax panel is considering a proposal to reduce the goods and services tax (GST) on food delivery charges from 18% to 5%.

CNBC-TV18 has reported that the potential reduction is set to be discussed at the 55th GST Council meeting on 21 December 2024 in the city of Jaisalmer, Rajasthan.

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The move could lower costs for consumers using e-commerce platforms to order food.

The proposed tax cut is a response to requests from e-commerce food delivery services for parity with restaurant services.

The GST Council’s fitment committee has recommended that the change, if agreed, should be applied retrospectively from 1 January 2022.

However, e-commerce operators would not be able to claim input tax credit (ITC) under the reduced rate when filing their GST returns.

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The impact of the proposal extends beyond consumer savings and could affect how e-commerce platforms manage their finances, as the current 18% GST rate entitles them to significant ITC benefits.

A lower rate without the option for ITC may increase the overall tax burden for some operators.

The food delivery sector is closely monitoring the situation, especially in light of recent GST notices issued to companies such as Zomato.

The potential tax cut could herald a shift in the cost dynamics of online food delivery in India.

Zomato was recently ordered by the country’s tax department to pay Rs8.04bn ($94.8m) for non-payment of taxes and penalties from 2019 to 2022.