New Delhi, Sept. 7 -- The government's decision to impose 18% goods and services tax (GST) on delivery services is set to squeeze margins across India's logistics ecosystem-from IPO-bound Porter and Uber Delivery to unicorn Rapido and heavyweight Delhivery. With fuel-their biggest cost-kept outside GST and ineligible for input tax credit, logistics firms can't offset expenses-forcing them to pass the burden onto small businesses and consumers, while also thinning delivery workers' earnings.

At its latest meeting, the GST Council decided to bring local delivery services offered through e-commerce platforms under the GST net, with a tax rate of 18%. If the delivery partner is unregistered, the responsibility for paying the tax shifts to th...