Deepinder Goyal's Zomato faces Rs 11.81 crore GST demand and penalty order

Foodtech giant Zomato has been slapped with a GST demand and penalty order totalling Rs 11.82 crore.

The order, issued by the Additional Commissioner, Central Goods and Services Tax, Gurugram, includes a GST demand of Rs 5.9 crore and an equal amount in penalties for the period from July 2017 to March 2021. The demand is specifically linked to export services that Zomato provided to its foreign subsidiaries.

What did Zomato say?

Upon receiving the order, Zomato was quick to announce its plan to challenge it. The company expressed confidence in having a "strong case on merits" and will be filing an appeal before the appropriate authority.

In an exchange filing, Zomato highlighted that they had previously addressed the allegations with supporting documents and judicial precedents during the show cause notice phase but felt these were not sufficiently considered by the tax authorities.

"Pursuant to Regulation 30 of the Listing Regulations, this is to inform that the Company has received an order for the period July 2017 to March 2021 passed by Additional Commissioner, Central Goods and Services Tax, Gurugram raising demand of GST of INR 5,90,94,889/- with applicable interest (not quantified) and penalty of INR 5,90,94,889/- The details of the orders, as required under Regulation 30 of the Listing Regulations read with SEBI Circular dated July 13, 2023 is enclosed herewith as an Annexure 1," Zomato said in an exchange filing.

"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.

Zomato's international operations

The timing of this order comes as Zomato is scaling back its international footprint. The company has gradually been closing down its overseas operations, having already liquidated its ventures in Vietnam, Poland, Singapore, the UK, the US, and South Africa.

These closures are part of a strategic shift to focus more on its core markets in India, as its international operations were contributing minimally to overall revenues.

Recent tax challenges faced by Zomato

This is not the first tax hurdle for Zomato. On April 2, the company faced a service tax demand and penalty order of over Rs 184 crore for non-payment issues from October 2014 to June 2017.

Additionally, on April 1, the Karnataka Commercial Taxes Authority demanded Rs 23 crore for alleged discrepancies related to excess input tax credit under GST rules.