Zomato receives show cause notice worth Rs 402 crore for unpaid GST on delivery charges

Zomato Ltd., the food delivery aggregator, disclosed in an exchange filing that it received a show cause notice on December 26 from the Directorate General of GST Intelligence, Pune Zonal Unit.

The show cause notice pertains to an alleged tax liability worth Rs 401.7 crore along with interest and penalty for the period between October 29, 2019 and March 31, 2022. The tax demand has been made under Section 74 (1) of the Central Goods and Services Tax Act, 2017.

The tax amount alleged in the notice is based on the sum collected by the company as “delivery charges” from customers on behalf of the delivery partners during the period highlighted above.

In response, Zomato said that it is not liable to pay any tax since the “delivery charges” are collected by the company on behalf of the delivery partners. Additionally, the delivery partners have also provided service to the customers and not the company.

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Zomato’s Response to Notice: Legal Support and Strategic Caution

“This is also supported by opinions from our external legal and tax advisors,” Zomato said in an exchange filing, adding that it will file an appropriate response to the notice.

However, the company has highlighted that no order of any kind has been passed against the company and they have made this disclosure just as a matter of caution given the amount of tax in question. Zomato believes that it has a strong case on merit.

Shares of Zomato ended 1.5% higher on Wednesday at Rs 126.85. The stock has gained 110% so far in 2023.

CNBC-TV18 had reported on Wednesday as to how Mutual Funds have increased their stake in the company over some time as the stock reported consecutive quarters of profitability.

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