Big Blow For Zomato As It Gets Slapped With Rs 402 Crore GST Notice, Shares Sink Too

Rs 402 crore. That's the mammoth amount of GST notice that the online food ordering platform Zomato has recently received. The company's shares responded to this by falling more than 3% today.

What Notice Has Zomato Received?

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Zomato received a Rs 402 crore show cause notice from the goods and services tax (GST) authorities over unpaid tax on delivery charges collected from customers, the company said in a BSE filing late Wednesday.

Zomato said it is not liable to pay these taxes as it only collects fees on behalf of its delivery partners. Zomato said it would submit a response to the notice. The tax notice pertains to the period between October 29, 2019 and March 31, 2022, as per ET.

In November, the Directorate General of GST Intelligence (DGGI) issued pre-demand notices to Zomato as well as its Bengaluru-based rival Swiggy, seeking GST of Rs 750 crore.

Why Has Zomato Received The Rs 402 Crore Notice?

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Zomato has received a Rs 402 crore notice from GST authorities over unpaid tax on delivery charges collected from customers.

The key point of contention here is that the government is asking food-delivery platforms to pay GST on delivery fees collected by them from customers, whereas the companies argue that the said charges are only collected on behalf of delivery partners.

¡°Further, in view of the contractual terms and conditions mutually agreed upon, the delivery partners have provided the delivery services to the customers and not the company," it said in the filing.

Also Read; Zomato Appoints Its First 'Chief Fitness Officer' For Employees' Health

What Changes Are Seen As The Reason Behind The GST Notice?

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Beginning January 1, 2022, food delivery platforms had become liable to collect and deposit GST on behalf of restaurants for sales made through them. However, no clarity was provided on the delivery fee component, the report mentioned.

Typically, in the case of aggregators like Zomato and Swiggy, gig workers operate as delivery partners, and are paid based on the orders serviced. Users are charged a fee for this delivery, except in loyalty programmes under which the platforms waive the charges.

Earlier last month, it was reported that the companies were engaging with lawyers and tax consultants while also planning to approach the government to clarify their stance. ¡°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,¡± Zomato said in its filing.

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