Food delivery giant Zomato has been slapped with a Goods and Services Tax (GST) notice, amounting to ₹401.7 crore, by the Directorate General of GST Intelligence (DGGI). The notice alleges non-payment of GST on delivery charges, contending that these charges fall under the services category and require an 18% GST payment.
Zomato’s Response and Legal Stand
Zomato responded to the show cause notice, asserting that it is not liable to pay any tax. The company explained that the delivery charge is collected on behalf of delivery partners, and according to mutually agreed contractual terms, it is the delivery partners who provide services to the customers, not the company itself. Zomato has the support of external legal and tax advisors and plans to file a comprehensive response to the notice.
Penalties and Interest Demands
The tax authority has instructed Zomato to pay penalties and interest from October 2019 to March 2022 due to its failure to pay tax on delivery charges collected from customers on behalf of delivery partners.
Zomato’s Disclosure and Stand as a Publicly Listed Firm
Despite being a publicly listed company, Zomato voluntarily disclosed the GST notice and emphasized that no adverse order has been passed. The company believes it has a strong case on merit and intends to handle the situation with caution.
GST Council’s Impact on Food Delivery Services
In January 2022, the GST council introduced a 5% tax on food delivery services, bringing ‘restaurant services’ under the purview of GST. This change led to platforms like Zomato and Swiggy paying 5% GST on restaurant services.
Platform Fee Hike and Ongoing Developments
In October, Swiggy increased the platform fee on food delivery orders, impacting the overall cost for consumers. Zomato’s GST notice adds to the challenges faced by food delivery platforms, prompting close scrutiny of their tax liabilities and financial practices. Stay tuned for further updates on this evolving situation.
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