Swiggy Instamart CEO Amitesh Jha has expressed optimism about the upcoming festive season, predicting a significant increase in demand compared to the previous year. This surge is expected to be driven by recent GST cuts, which are anticipated to boost consumer spending.

Early Indicators Point to Record-Breaking Season

Early signs from recent festivals have been encouraging for the quick-commerce platform. Jha noted that orders during Raksha Bandhan saw a remarkable 3.5-fold increase compared to normal levels, surpassing the company's expectations. Similarly, initial data from Ganesh Chaturthi has reinforced the belief that this could be one of the biggest festive seasons for Swiggy Instamart.

GST Cuts Expected to Fuel Consumption

The CEO attributes a significant portion of the expected growth to recent GST reductions. These tax cuts are likely to make products more affordable for consumers, potentially leading to increased purchasing power and higher order volumes during the festive period.

Operational Challenges Amid Demand Spikes

While the projected growth is promising, Jha also highlighted concerns about the platform's ability to meet the anticipated surge in demand. He identified unpredictability as the biggest challenge facing Swiggy Instamart during these peak periods. The company is likely to face operational hurdles in managing inventory, delivery logistics, and maintaining service quality during sudden spikes in orders.

Five Years of Growth and Team Alignment

Reflecting on Swiggy Instamart's journey, Jha credited the platform's success over the past five years to the alignment and focus of the Instamart team. This cohesive approach has been instrumental in navigating the rapid growth and evolving demands of the quick-commerce sector.

As the festive season approaches, all eyes will be on Swiggy Instamart to see how it manages the expected surge in orders and whether it can capitalize on the anticipated increase in consumer spending following the GST cuts.

The Goods and Services Tax (GST) Council has made a significant decision that could impact major food delivery platforms in India. Zomato and Swiggy , two of the country's leading food delivery services, will now be required to pay 18% GST on delivery fees under section 9(5) of the CGST Act.

New Tax Implications

The GST Council's decision brings local e-commerce delivery services under the tax net, potentially affecting the cost structure of these platforms. Previously, GST was not consistently applied to delivery fees, especially when considered a pass-through to delivery personnel.

Impact on Zomato and Swiggy

For Zomato, the impact could be substantial:

• Current food delivery customer fee: Rs 11.00-12.00 per order
• Potential GST impact: Rs 2.00 per order

Swiggy might face an even larger impact:

• Current delivery fee: Approximately Rs 14.50 per order
• Potential GST impact: Rs 2.60 per order

Differential Impact on Subsidiaries

Interestingly, the impact varies for subsidiaries of these companies:

• Zomato-owned Blinkit: No new incremental impact expected as it already collected GST on delivery fees.
• Swiggy Instamart:
  • Current delivery fee component: Rs 4.00 per order
  • Potential GST impact: Rs 0.80 per order

Financial Implications

Morgan Stanley, in its analysis, notes that this GST change could have two potential outcomes:

1. Hurt profitability if companies choose to absorb the cost
2. Impact demand if the additional cost is passed on to consumers

Resolution of Past GST Demands

Both Zomato and Swiggy have faced GST demands from various states regarding past delivery services. The new notification may help in resolving these cases over time, providing clarity on the tax structure for food delivery services.

Industry Outlook

This development marks a significant shift in the taxation landscape for food delivery platforms in India. As companies grapple with the new tax implications, it remains to be seen how they will adjust their pricing strategies and operational models to maintain profitability while ensuring customer satisfaction.

The food delivery sector, which has seen substantial growth in recent years, particularly during the pandemic, may need to reassess its financial projections in light of these new tax obligations. The coming months will likely reveal how Zomato, Swiggy, and other players in the industry adapt to this regulatory change.