Zomato’s parent company, Eternal Ltd, reported a mixed second quarter (Q2FY26), as its food delivery business faced headwinds from a new 18 percent Goods and Services Tax (GST) on delivery charges. While the quick commerce arm Blinkit showed promise, consumer caution and taxation changes weighed on the overall performance.
Credits: Moneycontrol
The GST Curveball: Passing the Buck to Consumers
During the September quarter, the GST Council’s decision to bring food delivery platforms directly under the tax net under Section 9(5) of the CGST Act came into effect. This meant that platforms like Zomato and Swiggy were now responsible for collecting and remitting GST on delivery services — something restaurants previously handled.
Zomato’s Chief Financial Officer, Akshant Goyal, said this regulatory change had a “slight negative impact” on growth because the company had passed on the tax burden to customers. “The GST on the delivery charge we collect from customers in the food delivery business has had a slight negative impact on the growth of the business,” he said in a shareholder letter announcing Q2FY26 results.
The levy currently affects around a quarter of Zomato’s orders, particularly those where delivery is not free. Orders covered under loyalty programmes or promotional discounts remain exempt. Goyal clarified that Blinkit is unaffected, since its delivery model already factors in 18 percent GST as part of its existing structure with delivery partners.
How the New Tax Shaped Consumer Behaviour
The new GST didn’t just add to the bill—it also nudged customers to think twice before ordering. Goyal admitted that consumer demand dipped as the higher delivery cost, combined with a general slowdown in discretionary spending, led people to delay purchases.
“We saw a negative impact on both growth and margins as customers went into a wait-and-watch mode, delaying their purchases across categories,” Goyal explained. The timing of the GST implementation also coincided with broader consumer caution triggered by rate changes across multiple sectors, even in categories where no revisions were announced.
Industry analysts estimate that this GST-related cost shift could amount to Rs 180–200 crore annually for major food delivery platforms. While the direct financial impact on Zomato wasn’t disclosed, the company’s delivery growth numbers suggest that users—especially those outside subscription programs—are recalibrating their spending patterns.
Blinkit Finds a Tailwind in GST Rate Cuts
While food delivery stumbled, Blinkit, Eternal’s quick commerce unit, may have reason to smile. GST rate cuts on everyday essentials and household goods have lowered the average tax rate on Blinkit’s product basket by around three percentage points.
“The GST rate cuts have brought down the average GST on Blinkit’s typical basket, which should drive more demand,” Goyal noted. He expects this positive impact to reflect more clearly in the company’s third-quarter performance.
This potential boost could help Blinkit further cement its leadership position in India’s booming quick commerce market, where speed, convenience, and affordability continue to win customers.
Eternal’s Mixed Quarter: Strong Revenue, Shrinking Profit
Despite the taxation hiccup, Eternal’s topline growth remained strong. The company reported a 183 percent year-on-year jump in revenue, reaching Rs 13,590 crore in Q2FY26, compared to Rs 4,799 crore in the same period last year. Revenue also grew sharply from Rs 7,167 crore in the previous quarter.
However, profits told a different story. Eternal’s profit after tax (PAT) plunged 63 percent year-on-year, falling to Rs 65 crore from Rs 176 crore a year ago. The decline reflects not only the GST impact but also transitional consumer behavior as India adjusted to the new tax norms.
The company, which rebranded from Zomato to Eternal in March 2025, has been attempting to position itself as a multi-platform consumer tech ecosystem—balancing the high-frequency nature of food delivery with the explosive potential of quick commerce.
Credits: The Economic Times
What Lies Ahead
With the festive season approaching, analysts believe Eternal’s next quarter could offer a rebound. If consumer sentiment stabilizes and Blinkit’s GST advantage plays out, the company might recover lost momentum.
For now, however, the message from Q2FY26 is clear: taxation tweaks can reshape consumption patterns overnight. And for Zomato’s food delivery arm, that’s meant adjusting to a world where every rupee on the bill—and every tax line—matters more than ever.
