The Price of Convenience: How New GST on Delivery Charges Hit Zomato's Growth

 
The financial landscape for India's food-tech giants is constantly evolving, often dictated by regulatory shifts. Following its Q2 FY26 results, Zomato’s parent company, Eternal, confirmed a tangible impact on its core food delivery business: the newly implemented 18% Goods and Services Tax (GST) on delivery charges has acted as a headwind, slightly slowing growth.

Eternal’s CFO, Akshant Goyal, elaborated on this dynamic, providing a clear window into how taxation policies immediately affect consumer behavior and, consequently, the company's financials.

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The 18% GST Burden and Customer Reaction

Effective late September, a key regulatory change mandated that e-commerce operators like Zomato are now responsible for collecting and paying 18% GST on the delivery fees charged to customers. This clarification by the GST Council closed a loophole where delivery fees were previously treated as a pass-through cost, exempt from GST.

Passed on to the Consumer

The most significant takeaway from the CFO's statement is that this tax burden has been passed on to the customer.

v  Impacted Orders: This change affects approximately 25% of all food delivery orders—specifically, those where the customer pays a delivery fee. (The existing "platform fee" already attracted 18% GST).

v  The Cost Factor: By increasing the final cost to the consumer, the platform observed a "slight negative impact on the growth of the business." Even a modest increase in the transaction price can cause some customers to pause, delay, or reduce the frequency of their orders, especially during periods of soft discretionary consumption.

A Tale of Two Platforms: Zomato vs. Blinkit

It is crucial to note the differential impact across Eternal's portfolio. While the food delivery arm (Zomato) felt the pinch, the quick commerce segment (Blinkit) remained unaffected by this specific change.

v  Blinkit’s Model: Blinkit’s model for engaging with its delivery partners meant that delivery charges were already inclusive of 18% GST, resulting in no change or incremental tax burden on its customers.

v  A Separate Boost: In fact, Blinkit benefited from separate, simultaneous GST rate cuts on its typical basket of products (estimated at a 3 percentage point reduction). This is expected to be a demand driver for the quick commerce business from Q3 FY26 onwards, effectively offsetting the cautious consumer sentiment seen in Q2.

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Q2 FY26 Financial Context

The GST change on delivery charges was one of several headwinds Zomato's food delivery business faced during the quarter. While overall company revenue soared by 183% to ₹13,590 crore, largely driven by the explosive 137% YoY growth in Blinkit's Net Order Value (NOV), the core food delivery segment showed a slower recovery.

v  Food Delivery NOV: Grew by 14% Year-on-Year (YoY). While this was a slight sequential improvement, management noted that the overall recovery was "slower than expected."

v  Headwinds: The slow uptick was attributed to several factors:

1. Soft discretionary consumption across India.
2. The ongoing impact of quick commerce growth (customers buying essentials via Blinkit instead of ordering food).
3. Increasingly volatile weather conditions (extreme heat and extended rains).

Despite the profitability of the food delivery segment reaching a record high, the increased tax on delivery charges remains a structural factor that adds friction to the customer experience, making cost management and demand generation a continuous balancing act for the platform.

This complexity underscores the tightrope walk that digital platforms must navigate: ensuring regulatory compliance while simultaneously striving to keep services affordable for the consumer to drive sustainable growth.