December 13th 2024.
Zomato, a popular food delivery and quick commerce service, has recently received a tax demand notice of Rs 803 crore from the Goods and Services Tax (GST) department in Mumbai. This notice, issued by the Joint Commissioner of CGST and Central Excise in Thane, includes both GST demand and interest and penalty charges.
According to a filing with the stock exchange, the tax demand is a result of Zomato not paying GST on their delivery charges. The total amount of Rs 803 crore consists of a GST demand of Rs 401.7 crore and an equal amount of interest and penalty. However, the company maintains that they have a strong case and will be appealing the order with the appropriate authorities, backed by the opinion of their external legal and tax advisors.
Interestingly, this is not the first time Zomato has received a GST demand notice. In January and June of this year, the company was issued notices for Rs 4.2 crore and Rs 9.45 crore, respectively. In 2023, Zomato had also received a GST demand notice of Rs 400 crore specifically for their delivery charges. These charges, along with those of other food and quick commerce companies like Swiggy, are levied on their services.
The reason behind this tax demand is that these companies consider their gig workers as delivery partners who are paid on an order basis. The delivery charge collected from users is then given directly to the gig worker. This has been deemed a service in GST laws, which allows for a 18 per cent GST to be levied on delivery.
Despite this setback, Zomato recently raised over $1 billion through qualified institutions placement of equity shares. Their stock is currently trading at Rs 285 apiece, with no significant changes following the tax demand notice. In the second quarter of the current financial year, Zomato's total income increased by 68.5 per cent to Rs 4,799 crore, while their net profit grew by 4.8 times to Rs 176 crore.
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