Zomato faces Rs 9.5 crore GST demand from taxi authorities, Here's what it will do

Deepinder Goyal-led food delivery giant Zomato has once again received a tax demand notice from the Assistant Commissioner of Commercial Taxes (Audit) Bengaluru, Karnataka. 

The demand amounts to Rs 9.45 crore and includes interest and penalties.

The notice is related to the excess availment of input tax credit for the financial year 2019-20. According to the company's exchange filing, the demand comprises Rs 5.01 crore in GST, Rs 3.93 crore in interest, and Rs 50.19 lakh in penalties.

Zomato to challenge the demand

"The Company in its response to the show cause notice had clarified on the issue along with relevant documents and judicial precedents, which appears to not have been appreciated by the authorities while passing the order," Zomato said.

Zomato has stated its intention to challenge the demand. The company 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," the company said in its filing.

Not the first time

This is not 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.

Increased scrutiny on food delivery companies

The GST demand notice to Zomato is part of a larger trend of increased scrutiny on food delivery companies. Similar to 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 totalling 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.