SWIGGY

Bundl Technologies Private Limited, or Swiggy.

"Swiggy is a food ordering and delivery company based out of Bangalore, India.
Swiggy was inspired by the thought of providing a complete food ordering and
delivery solution from the best neighbourhood restaurants to the urban foodie. A
single window for ordering from a wide range of restaurants, we have our own
exclusive fleet of delivery personnel to pickup orders from restaurants and deliver it
to customers . Having our own fleet gives us the flexibility to offer customers a no
minimum order policy on any restaurant and accept online payments for all partner
restaurants that we work with. Our delivery personnel carry one order at a time which
ensures we get reliable and fast deliveries."

How Swiggy's co-founders changed the face of food delivery.

Nandan Reddy, 29, and Sriharsha Majety, 31, both alumni of Birla Institute of
Technology and Science (BITS) Pilani, are second-time-lucky entrepreneurs. In
2013, the two started their first venture Bundl, a logistics aggregator that connected
small and medium companies to courier service providers.

After almost a year in business, they realised their focus had to change. They had
spotted the need for an online hyperlocal logistics company in the restaurant
industry. By August 2014, the duo rolled out the online food ordering and delivery
startup Swiggy, along with Rahul Jaimini, 29, an IIT Kharagpur alumnus, who was
then working as a software engineer with online fashion etailer Myntra. Jaimini was
roped in to build the startups technology infrastructure.

Swiggy began operations in Bengalurus upscale neighbourhood of Koramangala

with six delivery executives and 25 restaurants on its platform. Today, it has scaled
up with over 6,000 delivery executives across NCR, Mumbai, Bengaluru, Hyderabad,
Chennai, Kolkata and Pune.

The startup has two major revenue streams. It collects commissions from
restaurants for lead generation and for serving as a delivery partner. Swiggy
also levies a nominal delivery fee from customers on orders below a threshold
value.

The disruption they have done, adds Lunia, is that they have made third-party food
delivery reliable. Earning consumer trust in the food sector is not easy.

The success is evident: Swiggy has raised a total of $75.5 million in funding from
various investors, including Bessemer Venture Partners, Norwest Venture, Accel
Partners, SAIF Partners, Harmony Venture Partners, RB Investments and Apoletto.

Reddy believes there is headroom for growth. We see a million orders a day as a
very real possibility in the next five years, he says.

http://www.forbesindia.com/article/30-under-30-2017/30-under-30-how-
swiggys-cofounders-changed-the-face-of-food-delivery/45761/1

Swiggy wins Startup of the Year at ET Startup Awards 2017.

Swiggy was the jury's unanimous choice as the winner of the most coveted category
at the ET Startup Awards 2017 - Startup of the Year. Swiggy delivers food from at
least 15,000 local restaurants, processing about 4 million orders a month across
eight cities. It has been able to trim delivery costs by 35% by charging a minimum
fee and additional charges during inclement weather. Swiggy is now experimenting
with cloud kitchens to take food from popular restaurants to multiple locations
beyond their immediate neighbourhoods.

http://economictimes.indiatimes.com/small-biz/startups/swiggy-wins-startup-
of-the-year-at-et-startup-awards-2017/articleshow/60123236.cms

Another characteristic about Swiggy is its ability to create jobs. The food-ordering
platform has a 20,000-strong delivery fleet. Swiggy is far from where it aims to be
when it comes to an ideal fleet size. We are targeting a fleet size of about 1,00,000
over the next 5 years
Read more at:
http://economictimes.indiatimes.com/articleshow/59729651.cms?utm_source=conten
tofinterest&utm_medium=text&utm_campaign=cppst

Food ordering and delivery platform Swiggy has closed $80 million (Rs 517 crores
approximately) in Series E funding led by Naspers, with participation from existing
investors including Accel India, SAIF Partners India, Bessemer Venture Partners,
Harmony Partners and Norwest Venture Partners.

The platform which manages customer orders and delivers the food using its own
fleet has been grappling with bringing down cost of delivery as it posted 65 fold
increase in losses for FY 2015-16 at Rs 137.18 crore from Rs 2.12 crore in FY 2014-
15. The company has since tweaked the cost to consumer by levying delivery
charges and surge charges.

"We have seen 35% reduction in delivery costs and recorded 6x growth in revenues
last year. We will look at a strong growth year ahead," said ..

As part of the capital raise, Ashutosh Sharma, head of investments in India for
Naspers will join the Swiggy Board. "Swiggy has shown impressive growth in a
highly competitive market. Naspers was attracted to the company's exceptional
execution in disrupting online food ordering and delivery in India while many players
are struggling. Their ability to create a sustainable business, earning consumer trust
through a reliable first-party delivery technology, positions them well for success," ..

Read more at:

http://economictimes.indiatimes.com/articleshow/58907501.cms?utm_source=conten
tofinterest&utm_medium=text&utm_campaign=cppst
Goods and Services Tax (GST) on Online Food Delivery Websites

Not so long ago in order to have a one off scrumptious meal, an ordinary citizen was
required to go through the travails of an inordinately long distance to an upmarket
restaurant and satiate ones palate. On the downside, however, this would entail one
to have deep pockets and would limit such visits to only a couple in a month.
Recognizing the dearth of time in peoples lives and their urge to have everything
readily delivered to them, the young Indian entrepreneurial minds tapped into a
market segment that had high risks coupled with higher rewards. This sector was
Food Delivery.

Pick and Deliver (Marketplace

Model)

2.1.1 The website operates through a mobile app that depicts menus of different
restaurants. Example of such websites are Swiggy, JustEat, TinyOwl etc.

2.1.2 The website has tie ups with different restaurants and offers its services of food
delivery. The customer orders food on the website and makes the payment either
through credit/debit card or in cash on delivery. The payments are collected by the
website.

2.1.3 The website charges commission ranging from 7.5% to 20% from restaurants
for getting them orders and also charges commission to list them on its website.

2.1.4 At the end of the month/week, the website, after deducting its commission,
makes net payment to the restaurant for food sold via its website.

2.1.5 Currently, the website charges Service tax from restaurants on its commission.

3.1.1 Between Restaurant & Website

3.1.1.1 Current Indirect Tax structure

Service Tax levied on commission charged by the website.

3.1.1.2 Under GST structure

Introduction of the concept of supply that includes sale, barter, exchange, license,
rental etc of goods and services;

Commission charged from the restaurant is a supply of service, subject to GST;

One area of concern is whether supply of food from restaurant to the website (for
delivery to customer) shall also be considered as a supply, subject to GST. This view
emerges from a combined reading of the term agent that is inter alia defined to
include a person who supplies or receives goods on behalf of another and the term
supply that includes transactions between a principal and an agent and the term
supplier that means any person supplying goods/services and includes an agent
acting on behalf of such supplier in relation to the goods and services.

This further gets strengthened by reading the Schedule I of the Model GST Law,
where supply of goods without consideration by a taxable person to another taxable/
non-taxable person in the course or furtherance of business are deemed to be a
supply.

Basis the above, a view emerges that transaction of handing over (supply) of food by
the restaurant to the website (even though the website acts as an agent) may be
subject to GST.

Although, the above view seems visible upon reading the provisions of the Model
GST law, any such interpretation shall make the concept of agent redundant and the
concept of GST flawed.

Between Website & Customer

3.1.2.1 Current Indirect Tax structure

The website may charge a consideration for delivery of food to the customer on
which Service tax may apply.

3.1.2.2 Under GST structure

As discussed above, transaction between the website and the customer may get
covered as a supply, subject to GST. However, this issue is subject to clarification
from the Government.

3.1.3 Between Customer & Restaurant

3.1.3.1 Current Indirect Tax structure

The restaurant charges VAT and Service Tax (in some cases) on sale of food.

3.1.3.2 Under GST structure

In an ideal scenario, the restaurant should charge GST on sale of food, to be

collected by the website for onward transfer to the restaurant. Similarly, commission
earned by the website should be subject to GST.

Other than the above, there should be no tax implications under this model.
3.1.4 Further, should the transaction of delivery of food from the restaurant to the
website be considered a supply, there are different challenges to be managed.
Currently, restaurant raises invoice to the customer. Under GST the restaurant may
have to raise the invoice in the name of website so that the latter is able to avail
credit of tax paid. Further, the website will raise invoice on the customer. This will
also cause issues around valuation considering a principal-agent relationship
between the restaurant and the website.

3.2 Now, moving towards the Cook and Deliver business model, complications
faced by websites under this model will be less in comparison to the Marketplace
Model. As per Schedule II of the Model GST Law, the activity of Cook and Delivery
shall be a deemed supply of service. Thus, supply of food to customers under this
model should be subject to GST.

3.2.1 The Cook and Deliver Model shall face a significant benefit in the form of
reduction in its costs. Under the current tax regime, the tax paid on input services
availed by the model are treated as a cost. This is because the model is engaged
purely in sale of goods, thus, having only sales tax liability and no Service Tax
liability. Under the GST regime, input tax paid by website shall be available as Input
Tax Credit (ITC), hence, reducing their cost burden.

https://www.linkedin.com/pulse/goods-services-tax-gst-online-food-delivery-
websites-nimish-goel
 Food ordering apps uncertain of GST slab; charge customers variable
rates, decline orders

Most companies are yet to come to terms with the new tax rates. Only one or two
have it sorted.

After the rollout of GST on July 1, the food tech industry has been shrouded in
uncertainty. While some services arent clear on what tax slab they fall under, some
have been allegedly charging variable GST rates and some others are said to have
doubled prices of items on their menu. Several customers have shared posts and
bills on social media claiming one or all of the above. Some have even said that their
orders were cancelled because of GST problems.

Food-tech companies such as Swiggy, Zomato, FreshMenu, and others are yet to
come to terms with the new tax reform. One food startup founder told BGR India that
everyone is waiting for the first tax filing (on July 15) to fully understand the impact
of GST on the industry. ALSO READ: UberEATS food delivery service launched
in India, takes on Zomato and Swiggy

It is not clear whether these companies fall under the same GST slab as e-
commerce companies like Amazon and Flipkart. If yes, they would charge customers
12 percent GST (6 percent Central GST + 6 percent State GST) on their food bills.
However, some customers claimed that Swiggy had charged 18 percent GST (the
AC restaurant rate) on certain orders. While on some other orders, no GST was

charged.
http://www.bgr.in/news/food-ordering-apps-uncertain-of-gst-slab-charge-customers-
variable-rates-decline-orders/
 TCS (tax collection at source) compliance for e-commerce sector

In the GST regime, e-commerce firms will have to deduct tax collected at source
(TCS) when they make payments to restaurants or vendors using their platform. This
can deter smaller restaurants with lower sales volume from going online.
A clause has been inserted under GST law for all the e-commerce aggregators. E-
commerce aggregators are made responsible under the GST law for deducting and
depositing tax at the rate of 1% from each of the transaction. Any dealers/traders
selling goods/services online would get the payment after deduction of 2% tax ((1%
each of Central GST and State GST). It is a significant change which would increase
a lot of compliance and administration cost for online aggregators like Flipkart,
snapdeal, amazon including the food delivery startups etc. They would need to
deposit the tax deducted by the 10th day of the next month.
All the traders/dealers selling goods/services online would need to get registered
under GST even if their turnover is less than 20 Lakhs for claiming the tax deducted
by Ecommerce operators.