Saturday, July 20, 2024

Why is Zomato Facing a Rs 9.45 Crore GST Demand Again?

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Zomato, the popular food delivery company led by Deepinder Goyal, has received another tax demand notice from the Assistant Commissioner of Commercial Taxes (Audit) in Bengaluru, Karnataka. The notice demands Rs 9.45 crore, which includes interest and penalties. This demand is related to the excess availment of input tax credit for the financial year 2019-20. According to Zomato’s exchange filing, the demand consists of Rs 5.01 crore in GST, Rs 3.93 crore in interest, and Rs 50.19 lakh in penalties.

Zomato to Challenge the Demand

Zomato plans to challenge this demand. The company mentioned in its filing that it had already responded to the show cause notice, providing relevant documents and judicial precedents. However, these appear to have been overlooked by the authorities. Zomato believes it has a strong case and will file an appeal against the order before the appropriate authority. “We believe that we have a strong case on merits, and the company will be filing an appeal against the order before the appropriate authority,” Zomato said in its statement.

Zomato food delivery brand

Not the First Time

This isn’t the first time Zomato has faced tax-related issues. Earlier this year, the company received several tax notices. In April, Zomato was issued a tax demand and penalty order amounting to over Rs 184 crore. Additionally, in December, the GST Intelligence sought Rs 401.70 crore from Zomato for tax liabilities between October 2019 and March 2022. Zomato responded that it was not liable to pay this amount, stating that delivery charges are collected by the company on behalf of delivery partners.

Scrutiny on Delivery Companies

The GST demand notice to Zomato is part of a larger trend of increased scrutiny on food delivery companies. Like Zomato, its competitor Swiggy also received a significant tax demand of Rs 350 crore. In January 2022, a new rule mandated that food delivery companies like Zomato and Swiggy pay 5% GST on restaurant services, a tax that was previously collected by the restaurants themselves. However, the rule changes did not clarify the tax treatment for delivery charges, leading to confusion and disputes.

The growing number of tax notices to Zomato and other companies in the industry indicates a stricter regulatory environment. The Goods and Service Tax department has been active in issuing demand notices totaling Rs 1.45 lakh crore to around 1,500 businesses in December last year alone. However, the actual recovery from these notices was significantly lower, amounting to Rs 18,541 crore by the end of December.

Zomato faces another significant GST demand but plans to challenge it, confident in its position. This situation highlights the increased scrutiny and regulatory challenges food delivery companies are facing in India.

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