Zomato Receives a Rs 402 crore Show Cause Notice for Unpaid GST

By Consultants Review Team Thursday, 28 December 2023

Zomato, a food delivery website, stated in a regulatory filing late Wednesday that it had received a Rs 401.7 crore show cause notice from the Directorate General of GST Intelligence, Pune Zonal Unit. The notification is based on the company's failure to pay goods and services tax (GST) on money collected from clients as delivery charges.

"The show cause notice requires the company to show cause as to why an alleged tax liability of Rs 401,70,14,706 along with interest and penalty for the period from October 29, 2019, to March 31, 2022, should not be demanded from the company," the company stated in the regulatory filing. The amount claimed in the SCN is based on the delivery charges collected by the company from clients on behalf of the delivery partners during the referred period." Zomato, on the other hand, stated that it was not required to pay any tax on delivery charges because they were collected on behalf of the delivery partners.

"Furthermore, in accordance with the mutually agreed upon contractual terms and conditions, the delivery partners have provided the delivery services to the customers rather than the company," it said, adding that Zomato will file an "appropriate response" to the show cause notice.

Food delivery platforms will be required to collect and deposit GST on behalf of restaurants for orders submitted beginning January 1, 2022. However, no information about delivery fees has been provided. Gig workers typically work as delivery drivers for food delivery platforms and are compensated based on the number of orders delivered.

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"At this stage, no order of any kind has been passed and as mentioned above, the company believes that it has a strong case on merit," the company said on Wednesday. As of 9:30 a.m. on Thursday, Zomato's shares were down more than 2% and trading at Rs 124.40 per share on the BSE.


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