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Both online <keyword id="6376068" type="General" weightage="20" keywordseo="Food-Delivery" source="Orion">food delivery</keyword> platforms charge some money from customers in the name of delivery fees. There is often a dispute between tax officers and food delivery apps regarding the delivery fee, which involves nearly Rs 1000 crore, according to the reports. When reached for a comment, <keyword id="830092" type="General" weightage="20" keywordseo="Zomato" source="Orion">Zomato</keyword> refused. <keyword id="6358977" type="General" weightage="20" keywordseo="Swiggy" source="Orion">Swiggy</keyword> did not comment either. As per Zomato and Swiggy, 'delivery charge' is nothing but the cost borne by the delivery partners who go to deliver food from door to door. Companies simply collect that cost from customers and pass it on to delivery partners. But, tax officials do not agree with this, as per the reports. Last month, Swiggy increased the platform fee from Rs 2 to Rs 3 for food orders. A Swiggy spokesperson told IANS, that "there has been no significant change on platform fee, which is applied by most service players and is a common practice across industries". In April, the company introduced a platform fee of Rs 2 per order, irrespective of the cart value. In August, Zomato also increased its platform fee to Rs 3 per order from an initial Rs 2. Zomato started charging the platform fee from Zomato Gold users, who were previously exempted.

Zomato, Swiggy slapped with Rs 500 crore GST each: Report

<ul><li><keyword id="830092" type="General" weightage="20" keywordseo="zomato" source="Orion">Zomato</keyword> and <keyword id="6358977" type="General" weightage="20" keywordseo="swiggy" source="Orion">Swiggy</keyword> will be liable to collect <keyword id="6354679" type="General" weightage="20" keywordseo="gst" source="Orion">GST</keyword> on online orders of food, instead of restaurants.</li><li>We don’t tax platforms like Amazon because we understand that they are marketplaces, why such difference with food aggregators, asks EY’s Bipin Sapra.</li><li>The tax loss to the government due to alleged under-reporting by food delivery aggregators is ₹2,000 crore over the past two years.</li></ul>India’s Finance Minister Nirmala Sitharaman on Friday announced that online food delivery platforms like Zomato and Swiggy will be the ones collecting goods and services tax (GST) from customers. The tax rate stays consistent at 5% and the ruling comes into effect on January 1, 2022. Earlier, it was the responsibility of the restaurants to do the same. It did seem pretty fair though, given that restaurants were the ones actually serving the customers while these new age platforms only facilitated online ordering. But it is what it is and the tax experts are not too impressed with it. The partners of renowned law and consultancy firms agreed that taxing platforms like Zomato and Swiggy was not the right way to go about this. “Are we asking Amazon and others to pay the tax? No, because we understand that separate from where there is a buy and sell,” EY’s Bipin Sapra said, adding that food delivery platforms work in a similar manner. But before we form an opinion about it, it is important to understand what this hullabaloo is all about. ‘It’s transfer of responsibility, not an add on tax.’ A customer pays a GST of 5% on each order they place, whether for dine-in or at-home delivery. The restaurants collect this GST because it is the one providing the services/product to the customers directly. The Indian government has now decided that restaurants would not be the ones collecting the taxes on online orders accepted through apps like Zomato and Swiggy. Instead, these food aggregator businesses will be the ones doing so. “They've actually said that these electronic commerce operators would be paying the tax on behalf of restaurants that are supplying customers through their platform. It is like a transfer of responsibility. The restaurant is not required to pay that, but yes they will continue to pay the tax for the offline sales,” PwC’s Anita Rastogi said in an exclusive interaction with Business Insider. Therefore, it doesn't really have much of an implication on customers in many cases as the GST rate stays the same. In some, it does. ‘I already pay GST on order, why do I care who collects it?’ While the government of India is yet to issue further clarification on the new GST norms for Zomato and Swiggy, the current facts have actually made the platforms quite redundant. If restaurants are not supposed to collect GST on online orders, does this mean that placing an order directly from the restaurants will be cheaper than placing it through these platforms? “If I order from a dhaba [roadside restaurant] next door and there is a 5% tax that Zomato charges, but if I call him directly, I don't have to pay 5% tax... Then that brings in inefficiencies and then takes away the whole purpose of having these platforms who are pushing the smaller players to reach a bigger audience,” Chilana &amp; Chilana Law Office’s Sandeep Chilana said. Even the tax experts or the platforms themselves are not too sure about how the government plans to play it out. Both Zomato and Swiggy have <a href="https://economictimes.indiatimes.com/tech/startups/swiggy-zomato-reach-out-to-govt-for-clarity-on-gst/articleshow/86439373.cms" data-type="tilCustomLink">reportedly</a> reached out to the government, seeking more details on the GST being levied on them. They are worried that this could lead to tax cascading (tax on tax). Abhishek Rastogi, partner at Khaitan &amp; Co, also raised similar concerns. There is one thing for sure — you will have more tax on your plate now. Earlier, restaurants below certain thresholds were exempted from paying GST on online or dine-in orders. Thanks to the new policies, even those restaurants would be under the tax next and ordering from your nearest dhaba will get more expensive. ‘This is precisely why the government took this up’ Despite the increase in online ordering, the government of India has not been able to fill up its treasury at the same rate. “These restaurants were required to take the GST and pay the tax to the government, but somewhere down the line — through technology, artificial intelligence, etc — many of the restaurants are not paying this particular tax to the government,” Rastogi said. As per the <a href="https://www.business-standard.com/article/economy-policy/5-gst-on-food-delivery-apps-fuel-to-stay-out-of-ambit-key-decisions-121091701376_1.html">estimates</a>, the tax loss to government due to alleged under-reporting by food delivery aggregators is ₹2,000 crore over the past two years. ‘But is there any way out?’ “The simplest solution which can be implemented as soon as possible was tax collected at source (TCS),” Rastogi added. Tax collected at source (TCS) is the tax payable by a seller, which he collects from the buyer at the time of sale. Platforms like Zomato and Swiggy are liable to pay TCS of 1%, which highlights that the government had already taken cognisance of the issue. The experts agree that increasing the TCS was a much simpler and faster way to go about things here, instead of introducing a new tax altogether. 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India needs to review how it wants to extract tax from Zomato and Swiggy

<ul><li><keyword id="830092" type="General" weightage="20" keywordseo="zomato" source="Orion">Zomato</keyword> has been subjected to a lot of criticism after a social media user pointed out that the same food when ordered online from a restaurant cost much more than when it was ordered offline.</li><li>A Linkedin user shared photos of two bills of the same restaurant — one generated for an offline order and the other for an online order placed from Zomato.</li><li>It is a common practice for restaurants to increase their prices on Zomato and <keyword id="6358977" type="General" weightage="20" keywordseo="swiggy" source="Orion">Swiggy</keyword> to ensure that they are not paying for the commissions.</li></ul>Zomato has come under a lot of fire after a social media user pointed out that the same food, when ordered online from a restaurant, cost much higher than when it was ordered offline. The restaurant aggregator and food delivery company has clarified that it has nothing to do with the prices offered by restaurants. Zomato says its job is limited to presenting the restaurant as an option to order from and enabling delivery. The additional price being charged by the restaurant was for the convenience of a warm meal delivered at the customer’s doorstep. <cmsannotation type="cmsannotation" annotationid="Here’s what happened:" comment="subhead" text="Here’s what happened:">Here’s what happened:</cmsannotation> A Linkedin user shared photos of two bills from the same restaurant — one generated for an offline order and the other for an online order placed from Zomato. The same dishes were priced differently on both the bills. While the offline purchase cost ₹512 including all taxes, the online food cost the customer ₹689, after a ₹75 discount. <div type="image" title="This is why it costs more to order online on Zomato and Swiggy than to dine-in" msid="92798799" hostid="261" sizebytes="50818"></div> The food was 35% more expensive online. <cmsannotation type="cmsannotation" annotationid="Why the difference in the bills?" comment="subhead" text="Why the difference in the bills?">Why the difference in the bills?</cmsannotation> Food delivery businesses like Zomato and Swiggy charge a certain commission — usually ranging between 24%-28% of the order value — from the restaurants that are receiving the orders. This is just the commission for generating business for the restaurant partner, and excludes charges for enabling delivery. Zomato and Swiggy charge the restaurants extra for allocating their own delivery partners to fulfill the order, although the delivery charges are also paid by the customers. While some restaurants opt for their own delivery partners, others choose to go with the option provided by the third-party app. It is a common practice for restaurants to increase their prices on third-party apps like Zomato and Swiggy to ensure they do not pay for the commission. Over the last two years, several restaurants have started accepting orders through their own apps and websites to save on these commissions and provide better offers to their customers. The food delivery companies also charge a certain premium from restaurants for discoverability of their restaurants, placement on the app and other promotional activities. This advertising cost is different for each restaurant based on their negotiated terms with Zomato and Swiggy. Such advertisement charges are also common on other e-commerce platforms like Amazon and Flipkart, to promote certain sellers. “We charge our restaurant partner commissions based on an agreed-upon rate. We remit to the restaurant partner a net amount equal to the cost of food ordered and packaging charges, less the commission and any restaurant-funded discounts. Separately, the restaurant partner may pay us for any food delivery- related advertisement on the platform,” Zomato had said in its red herring prospectus, before going public last year. <cmsannotation type="cmsannotation" annotationid="The issue of discounts" comment="subhead" text="The issue of discounts">The issue of discounts</cmsannotation> Zomato has shared the nitty-gritties of its business model in its red herring prospectus. The company has two types of discounts — the platform-funded discounts and the restaurant-funded discounts. The restaurant-funded ones as the name suggests are given by the restaurant that has taken the order from the customer while the platform-funded discounts are offered by Zomato. Swiggy works on similar lines. Both these platforms faced a lot of criticism from restaurant partners back in 2019 for their deep discounting practices, which forced these companies to decrease their discounts to an extent. “Once we have been able to establish a robust brand presence and achieve a high share of satisfied customers in a particular market, we are typically in a position to decrease marketing expenses on a per-order basis… As a percentage of total income, our advertisement and sales promotion expenses decreased from 88.43% in fiscal 2019 to 24.88% in fiscal 2021,” Zomato noted. And thus, as these discounts reduce, the food ordered online gets more expensive. 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This is why it costs more to order online on Zomato and Swiggy than to dine-in

Former <keyword id="12987696" type="General" weightage="20" keywordseo="bharatpe-co-founder" source="Orion">BharatPe Co-founder</keyword> and managing director <keyword id="2988161" type="General" weightage="50" keywordseo="ashneer-grover" source="Orion">Ashneer Grover</keyword> said on Tuesday that <keyword id="830092" type="General" weightage="100" keywordseo="zomato" source="Orion">Zomato</keyword> should have acquired its arch rival <keyword id="6358977" type="General" weightage="80" keywordseo="swiggy" source="Orion">Swiggy</keyword> than 10-minute grocery platform <keyword id="12724311" type="General" weightage="50" keywordseo="blinkit" source="Orion">Blinkit</keyword> to avoid the mayhem it is experiencing on Dalal Street. Zomato's share price tanked over 11 per cent on Monday and more than 7 per cent to hit an all-time low of Rs 43.05 on Tuesday. According to <keyword id="3433" type="General" weightage="50" keywordseo="grover" source="Orion">Grover</keyword>, merging Swiggy would have seen Deepinder Goyal-led Zomato to reach Rs 450 a share. "On the stock market - letsblinkit served piping hot misery to zomato in 10 minutes! Yeh hi agar Swiggy ko merge kar liya hota to Rs 450 ka stock hota!" (<keyword id="14560447" type="General" weightage="50" keywordseo="had-zomato" source="Orion">Had Zomato</keyword> merged with Swiggy, its stock price would have been Rs 450) tweeted Grover. Zomato acquired Blinkit for about $568 million, saying quick commerce is a natural extension of its food delivery business. The shares of the food delivery platform touched a new low of Rs 43.05 on Tuesday, wiping out more than Rs 89,000 crore. In May, Grover had said that buying Zomato shares, even when it had been falling for months, wouldn't be a bad idea. "It's all about perspective. If you were a Zomato employee and exercised your ESOP (employee stock ownership) at Rs 140 or higher post IPO, you probably paid more cost per share as Income Tax, than what you can buy today from the market freely. At Rs 56 per share price, markets are giving everyone ESOPs," he had tweeted. Grover, along with his wife <keyword id="13057738" type="General" weightage="50" keywordseo="madhuri-jain-grover" source="Orion">Madhuri Jain Grover</keyword>, has incorporated a new company called 'Third Unicorn Private Limited' that has both husband and wife as directors, according to the data available on Tofler. Third Unicorn has an authorised share capital of Rs 20 lakh and a total paid-up capital of Rs 10 lakh. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/dgca-gives-clean-chit-to-spicejet-says-no-safety-violation-found/articleshow/93133139.cms">DGCA gives clean chit to SpiceJet, says no safety violation found</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/sports/news/star-javelin-thrower-neeraj-chopra-ruled-out-of-commonwealth-games-due-to-groin-injury-ld/articleshow/93133172.cms">Star javelin thrower Neeraj Chopra ruled out of Commonwealth Games due to groin injury (Ld)</a>

Ashneer Grover blames Zomato's Blinkit acquisition for its share price fall

<ul><li>Section 80JJAA of the Income Tax Act gives deduction for three years to employers for hiring new people.</li><li>The current limit of this provision is ₹300,000 a year that effectively means that the compensation of these people should be less than ₹25,000.</li><li>If the limit is increased, it could help in boosting the salaries of and the number of jobs for gig workers.</li></ul>One of the major concerns raised by the gig workers — such as <keyword id="4235145" type="General" weightage="20" keywordseo="delivery-partners" source="Orion">delivery partners</keyword>, drivers and more — who work for companies like Zomato, Swiggy, BigBasket and Blinkit (Grofers), is <a href="https://www.businessinsider.in/business/startups/news/bigbasket-flipkart-and-urban-company-may-have-paid-fair-wages-but-it-wasnt-enough-to-earn-a-living/articleshow/88946309.cms">the lack of decent compensation</a>. But what if we were to tell you that if an existing provision of the Income Tax Act is clarified and amended, it could raise salaries for the gig workers. Under Section 80JJAA provision of the Indian Income Tax Act, companies can get a tax deduction for hiring new people. If a company’s workforce increased by 50, the salary paid to these employees would make the company eligible for an additional deduction of 30% for the next three financial years, Hemal Zobalia, Partner at Deloitte Haskins &amp; Sells LLP explains. For example, if the company is paying ₹1000 annually to each of these 50 employees, it will get ₹300 as tax deduction for each of them for each of the next three years. Essentially, 90% of the first year’s salary, for each of the new employees, will be deducted from the company’s taxable profit. The goal of this provision is to create more permanent employment for those who are “low-skilled”, according to Jimit Devani, a partner at Deloitte Haskins &amp; Sells. The provision is applicable for employees whose salaries are ₹25,000 per month or less.Increasing the salary limit to ₹35,000-₹40,000 may push more companies to hire permanent employees instead of contractual ones. Meanwhile, Zobalia is of the belief that this would also help in further increasing their payout and salaries. But there is a bigger challenge here. This is not a widely availed incentive by the companies for several reasons. First, companies prefer to hire people on contract and keep them on a third party’s payroll. Such companies cannot avail tax benefit under the 88JJAA provision. Bringing people on to the payroll makes them eligible for other benefits like pension, insurance, and severance to name a few, Devani said. The third parties, however, do avail these tax benefits for employees that have been on their payroll for at least eight months, Devani added. The second issue with this provision is that the benefit is available only on the net addition of employees. Say, a company has a total of 10 employees. Five of them quit the company in a year, and six more are hired in the same year. While the company has six new employees, the net addition to the workforce is only one. And, so, the tax rebate is available only for one additional employee, and not all six. Improving this provision under the income tax law may go a long way in creating sustainable employment for people with less-valued skills, across a range of industries including the gig economy of which the likes of Zomato, Swiggy, Amazon and Flipkart are part of. The current state of salaries in the gig economy As per <a href="https://www.businessinsider.in/business/startups/news/urban-company-ola-uber-are-not-the-best-places-for-gig-workers/articleshow/88561764.cms">Fairwork India report of 2021</a>, most newage digital platforms — including Zomato, Swiggy, Uber, Dunzo, PharmEasy and Ola — do not offer fair wages to the contractual workers associated with them. Even though companies like Flipkart, Urban Company and BigBasket pay higher and better, it still may not be enough to make local living wage after costs, the report adds. <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Company </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Avg income range, including cost </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Flipkart </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹14,500-₹25,000 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Urban Company </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹30,000* </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">BigBasket </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹18,000-₹24,000 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Zomato </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹20,000-₹30,000 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Swiggy </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹10,000-₹15,000 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>Note: Urban Company’s average salary excludes cost Source: Urban Company’s latest report, Apna.co It is important to note that there has been a further reduction in the payout for delivery executives due to decrease in rate cards and incentives, along with increased input costs of petrol and platform commissions. This has made matters worse for the Indian gig workers like delivery partners and drivers, the Fairwork report adds. Fairwork rates digital platforms on their treatment of gig workers who work for them. SEE ALSO <a class="tout-title-link" href="https://www.businessinsider.in/budget/news/budget-2022-why-income-tax-slabs-may-not-change-this-year/articleshow/89179572.cms">Budget expectations 2022: Here’s why income tax slabs may not change this year</a> <a href="https://www.businessinsider.in/budget/news/the-indian-government-has-spent-less-than-half-the-money-it-had-budgeted-for-capital-investments-so-far/articleshow/88852518.cms">The Indian government has spent less than half the money it had budgeted for capital investments, so far</a> <a href="https://www.businessinsider.in/budget/news/budget-2022-expectation-in-higher-standard-deduction-tax-slabs-and-covid-insurance/slidelist/88891751.cms">From higher standard deduction and change in tax slabs to clarity on Covid insurance, here’s what tax experts want from Budget 2022</a>

There’s a way government can prod Zomato, Swiggy, Uber and Ola to increase salaries of delivery partners and drivers

<ul><li><keyword id="830092" type="General" weightage="20" keywordseo="zomato" source="Orion">Zomato</keyword>’s promise to turn net profit positive in a year has cheered investors. </li><li>Margins in its core food delivery business has hit a multi-quarter high. </li><li>The worry? Monthly transacting users and gross order value has declined versus the previous reported quarter. </li><li>Nomura believes Zomato will find it difficult to achieve double-digit contributory margin with high growth in the long term </li></ul>Two years after it listed on the bourses, Zomato is on a recovery path. The stock which hit a high of over ₹150 per share fell sharply subsequently to below ₹50 a piece. However, the last quarter (Q1FY24) has seen a recovery from that level and it has now surpassed its listing price of ₹76. The stock has been rising steadily in the last three weeks, after its Q4 earnings report where it turned EBITDA positive in its core business, without including Blinkit, its quick commerce business. EBITDA is net income (earnings) with interest, taxes, depreciation, and amortisation. Moreover, the management also promised to turn positive not just at the consolidated adjusted EBITDA level but also at the profit after tax level in a year. Financial services company, JM Financial says this commitment is the ‘cherry on the cake’. “Tough macro posed growth headwinds but management showed urgency on profitability and that was despite the Gold programme launch,” said Jefferies. Zomato Gold is a subscription plan that offers free deliveries within a 10-kilometre radius for orders above ₹199. During the quarter, as many as 30% of the gross order value, from 1.8 million customers, came from Gold. The Gold plan could hurt its contributory margins (CM) because of its inability to charge every order. Yet, as of Q4, its CM in core food delivery business are comfortable after hitting a multi-quarter high. Contributory margins represent the incremental money generated for each unit sold after deducting the variable portion of the costs. “The core business milestone was achieved mainly on the back of solid expansion in the food delivery contribution margin to 5.8% in Q4 vs 5.1% in Q3. This was because profitability levers such as improvement in restaurant commissions and ad income, and lower discounts/variable cost offset the adverse impact of Gold launch,” said JM Financial. Ordering effects After the post-pandemic boom effects faded away, a lot of consumption patterns have changed, also evident in consumer spending on fast food — impacting growth in quick service restaurants. These headwinds have been impacting Zomato as well. The growth in Zomato’s food delivery business seems to have flatlined. Food gross order value declined 2% quarter-on-quarter, even as it grew 12% year-on-year. Moreover, its monthly transacting users (MTU) declined by 5% QoQ to 16.6 million, while growing at 6% YoY. Apart from the one-time impact of its decision to exit from 225 cities, the company attributes MTU decline to optimised marketing spend and withdrawal of the human support interface for abusive customer cohorts. “Also because of Zomato Gold, the MTUs have come down and not gone up because we do see an impact of clubbing some orders in the same households, which might have just a single membership,” Akshant Goyal, chief financial officer of Zomato said in an earnings concall. The management, however, remains confident about food delivery ordering going up in the first quarter of FY24. Analysts, on the other hand, are not too confident about their ability to sustain growth beyond the first quarter as summer holiday and IPL impact during April/May are one-off events. Its other businesses, however, continue to display good growth. Blinkit’s gross order value grew 17% QoQ, while order volume grew 24%. Revenues of Hyperpure, its business to supply ingredients to restaurants, grew 13.5% QoQ. Offsetting margins with growth While it’s on a path to profitability, Zomato is also caught between a rock and a hard place — of growth versus margins. To boost growth, it will have to go in for discounts – the lack of aggressive discounting by all players is already visible in the moderation in food ordered during the IPL season, generally a big occasion for online food platforms. This year, the IPL spike in food ordering was at a modest 7% for the industry as compared to the 2020 IPL when it was over 50%, as per Redseer. This time, there were no high <a href="https://www.businessinsider.in/business/news/ipl-2023-sees-tier-2-cities-order-more-on-swiggy-zomato/articleshow/100673879.cms">decibel ads along with deep discounts.</a> Like other players in the business, the company will also find it tough to keep up with the high margin trajectory, while also chasing growth. “Overall, we lower our growth assumptions for its food delivery’s gross order value growth, from around 20% to around 17%, but raise our FY24F contributory margin estimate from 5.8% to 6.5%. We continue to believe Zomato will find it difficult to achieve double-digit contributory margin, with high growth in the long term,” said Nomura. Restaurant commissions grow but may hit an ONDC wall In the last two years, the company was also able to improve take rates or the commissions it charges restaurants consistently. Its take rates are now close to 18%. “Broadly, with our take rates, the mission is to be competitive, and we are lower than what the competition is charging. So, as we continue to add more value to restaurant businesses, we expect some improvement in commission revenue going forward,” said Goyal. But competition is heating up in the sector. The Department for Promotion of Industry and Internal Trade’s Open Network for Digital Commerce (ONDC) has breached the territory that was hitherto dominated by Zomato along with Swiggy. On the face of it, it might seem like restaurants might be offered better terms on ONDC. While Zomato will be able to compete with ONDC on efficiency and also even overall costs – as third party deliveries might be costlier– HSBC Global Research believes that it might flatten growth. “Estimates for food delivery revenue in the long term remain largely unchanged. Our short-term estimates change slightly as we build in a marginally slower increase in take rate,” the research firm said. In spite of short-term and long-term challenges ahead, Zomato seems to have settled into its listed company status to deliver value to investors by chasing topline growth instead of customers, with discounts.

With Zomato rallying over 25% in the past month, street looks at the road ahead

New Delhi, The <keyword id="76562" type="COMPANY" weightage="20" keywordseo="Confederation-of-All-India-Traders">Confederation of All India Traders</keyword> (CAIT) in a communication sent to Union Commerce Minister <keyword id="6355222" type="PERSON" weightage="20" keywordseo="piyush-goyal">Piyush Goyal</keyword> demanded <keyword id="2465241" type="PERSON" weightage="20" keywordseo="immediate-action">immediate action</keyword> against e-commerce entities including <keyword id="18635" type="CITY" weightage="20" keywordseo="Amazon">Amazon</keyword>, <keyword id="6354742" type="COMPANY" weightage="20" keywordseo="Flipkart">Flipkart</keyword>, <keyword id="830092" type="COMPANY" weightage="20" keywordseo="Zomato">Zomato</keyword>, <keyword id="6358977" type="UNKNOWN" weightage="20" keywordseo="swiggy">Swiggy</keyword> and others. "It is a case of daylight robbery of e-commerce entities in India and therefore demand immediate action against the erring e-commerce portals and online mechanism providers," CAIT said. CAIT has accused Amazon, Flipkart, Zomato, Swiggy and various other e-commerce entities for violation of mandatory display of Country of Origin and Manufacturer, seller Details on products sold through their respective E-Commerce Portals as required under the Consumers Protection (E Commerce) Rules,2020, Legal Metrology (Packaged Commodities) Act, 2011 and guidelines of Food Safety &amp; Standards Authority of India. CAIT has asked Goyal to take action against E-commerce entities including Amazon, Flipkart, Zomato, Swiggy and others. "It is a case of daylight robbery of e-commerce entities in India and, therefore demands immediate action against the erring e-commerce portals and online mechanism providers," CAIT said. CAIT National President B.C. Bhartia and Secretary General Praveen Khandelwal in a communication to Goyal said that e-commerce entities conducting business in India including Amazon, Flipkart and others are highly violating the mandatory conditions spelled out in above Acts. "It is a pity that particularly in e-commerce every guidelines, Rules &amp; Regulations, Laws and policies are being flouted openly and no department has so far taken any cognizance of compliance issues resulting in a highly vitiated and mess like e-commerce trade of India," CAIT said. Bhartia and Khandelwal said that Rule 10 of Legal Metrology (Packaged Commodities) Rules, 2011 provide that e-commerce entities should have to display name and address of the manufacturer, name of the country of origin, common/generic name of the product, net quantity, best before/use by date (if applicable), maximum retail price, dimensions of the commodity, etc. This rule was introduced in June 2017 and provided a transition period of six months thereby its implementation from January 1,2018 but even after a lapse of three years, the above rules are not being complied by e-commerce companies prominently by Amazon, Flipkart, etc. Failure to make declarations as above will amount to selling non-standard packages and will invite penalty under the above said Act, including fine or imprisonment or both, CAIT said. Both trade leaders further said that similar obligations were imposed on e-commerce food business operators vide guidelines issued by the Food Safety &amp; Standards Authority (FSSAI) on February 2,2017. "But such FBOs like Zomato, Swiggy, etc. are not complying with the above rules," CAIT said. Bhartia and Khandelwal said that under Rule 4(2) of the Consumer Protection (E Commerce) Rules, 2020, it is provided that every e-commerce entity shall provide the following information in a clear and accessible manner on its platform, displayed prominently to its users, namely, legal name of the e-commerce entity, principal geographic address of its headquarters and all branches, name and details of its website, and contact details like email address, fax, landline and mobile numbers of customer care as well as of grievance office. Similar provisions are also spelled out in Press Note 2 of the FDI Policy, 2016. CAIT said no e-commerce entity has appointed a Nodal Officer as also complying with above provisions. Important rights of the consumers are being violated as they are not aware of the seller or description of the product at the time of purchase of products from e-commerce portals. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/mrs-bectors-shares-are-down-32-from-the-peak-post-listing-analysts-say-it-is-still-overpriced/articleshow/80430865.cms">Mrs Bectors shares are down 32% from the peak post listing — analysts say it is still 'overpriced'</a> <a href="https://www.businessinsider.in/budget/news/indias-co-working-sector-wants-recognition-under-real-estate-tax-benefits-as-flexible-workspaces-aim-for-a-significant-revival-in-the-post-covid-era/articleshow/80431768.cms">India’s co-working sector wants recognition under real estate, tax benefits as flexible workspaces aim for a significant revival in the post-COVID era</a> <a href="https://www.businessinsider.in/stock-market/news/how-to-check-allotment-status-of-indian-railway-finance-corporation-irfc-ipo/articleshow/80406208.cms">Indian Railway Finance Corporation IPO allotment: Here’s how to check share allotment status</a>

CAIT seeks action against Amazon, Zomato, Flipkart and Swiggy for 'daylight robbery'

<ul><li>While Zomato’s sales have been increasing, the food delivery giant is still unable to make profits on account of huge expenses led by discounts and marketing.</li><li>It posted a net loss of ₹1,222 crore for the March quarter, which is an increase of nearly 50% since last year.</li><li>However, analysts believe the food delivery business has a huge potential as it is estimated to be a $110 billion opportunity by 2025.</li><li>Both Zomato and its rival Swiggy together hold 90-95% market share in India’s food delivery business.</li></ul>Food delivery company Zomato has been reeling under the pressure to turn profitable since July last year, <a href="http://a-strong-public-market-debut-at-51-premium-shares-open-at-115/articleshow/84667265.cms">the day it went public </a>and raised over ₹9,000 crore from the public. Since its listing, Zomato investors have seen their wealth decline by half, and there seems to be no letting up yet. Brokerages believe there might be a chance for the company to woo investors in a few years as there lies a huge opportunity in front of them. According to a report by JM Financial, Zomato’s path to operational profitability (also known as EBITDA profitability) requires two things. EBITDA is short for earnings before interest, taxes, depreciation and amortisation. “We believe order volumes and contribution margin per order are two key variables that would determine Zomato’s path to profitability. Our analysis suggests the company can turn profitable in FY25 on a cash EBITDA basis if it were to reach annual order volumes of 1 billion (2.5x FY20 levels) and a contribution margin of around ₹21 per order,” said the report. Adding to it, the report says it sees a ramp-up beyond the food ecosystem can also provide incremental growth. It expects Zomato to follow global peers in terms of expanding beyond food delivery and explore adjacencies in the form of grocery delivery, alcohol delivery, medicine delivery, on-demand delivery and insta shopping. Its recent investment in Grofers and a majority stake in Fitso is a validation of expansion into adjacent areas, states the report. Gen Z population offers attractive growth opportunities to Zomato The number of online shoppers in India is <a href="https://www.businessinsider.in/business/ecommerce/news/india-will-have-more-ecommerce-users-by-2025-than-us-population/articleshow/92062424.cms">expected to grow </a>to 300- 350 million by FY25 from 100-110 million in FY20 according to Bain &amp; Company. “With around 10 million monthly active users, the current penetration rate for Zomato within the online product shopper base works out to around 10%. We expect this penetration to increase to around 15% over the next 5 years, effectively growing the monthly active user base of Zomato to 45 million by FY26,” said the report. The brokerage expects the growth to be driven by the growing share of millennials/Gen Z in the ‘earning’ population and fast-growing e-commerce penetration beyond Tier-1 cities. Customer addition remains strong, but 9 out of 10 orders are from old users New customer additions by Zomato remained strong in Jan-Mar with around 5.5 million new additions. However, more than 90% of its food delivery business is being driven by repeat users compared to new users. “The company expects growth in the near term to be driven by repeat customers as there is substantial room for improvement in average annual ordering frequency (which is around 10 per user per year),” said the report by JM Financial. Zomato now operates in more than 1,000 cities across India as it added 300 plus new cities in Jan-Mar. Top 8 cities contributed around 60% to gross order value. However, its losses continue to swell, ballooning by nearly 50% in the March quarter to ₹1,222 crore, when compared to the previous year. Some analysts believe the change in the company’s performance needs to happen soon to turn around the loser story. “With the current inflation, the margins will lower further due to increased cost of fuel, raw materials etc. Acquiring different companies won’t help much in expansion, rather it will make management more difficult,” said Majoj Dalmia, founder and director at Proficient Equities. “Existing management needs to be optimised for profitability; the growth prospects will depend on current performance and not future, if there is a turnaround now, then we can expect some good growth story,” he added. <div type="javascript" title="Custom" contenttype="Image"><cdata><![CDATA[]]></cdata></div> SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="http://www.businessinsider.in/business/startups/news/pepper-content-raises-14-million-to-enter-the-us-market/articleshow/92084581.cms">INTERVIEW: Pepper Content skip the traditional Middle East route, heads directly for the US market</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="http://www.businessinsider.in/stock-market/news/wipro-yes-bank-tata-power-among-stocks-to-watch-out-for-on-june-9/slidelist/92094551.cms">Wipro, Yes Bank, Tata Power among stocks to watch out for on June 9</a>

You Searched For "tax on zomato swiggy" and got 8 results

Zomato, Swiggy slapped with Rs 500 crore GST each: Report

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India needs to review how it wants to extract tax from Zomato and Swiggy

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This is why it costs more to order online on Zomato and Swiggy than to dine-in

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Ashneer Grover blames Zomato's Blinkit acquisition for its share price fall

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There’s a way government can prod Zomato, Swiggy, Uber and Ola to increase salaries of delivery partners and drivers

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With Zomato rallying over 25% in the past month, street looks at the road ahead

Katya Naidu

CAIT seeks action against Amazon, Zomato, Flipkart and Swiggy for 'daylight robbery'

IANS

Zomato’s path to profitability in the next three years requires two things, say analysts

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