Zomato slapped with ₹803cr GST demand notice over delivery fees
What's the story
Leading food and grocery delivery platform Zomato has received a tax demand notice of ₹803.4 crore from the Goods and Services Tax (GST) authorities in Maharashtra. The notice comprises unpaid taxes of ₹401.7 crore along with an equal amount in penalties and interest. The demand relates to tax dues between October 29, 2019, and March 31, 2022.
Issue details
Tax demand notice revolves around delivery fee taxation
The tax demand notice revolves around the taxation of delivery fees charged by platforms such as Zomato and its competitor Swiggy. Under GST laws, food delivery is taxed at 18%. The government contends these platforms should pay this tax on service fees charged. Responding to the notice, Zomato said: "We believe that we have a strong case on merits which is backed by opinions from our external legal and tax advisors." Zomato intends to appeal against the tax demand order.
Market response
Impact on Zomato's share price and future challenges
After the news of the tax demand notice, Zomato's share price dropped by 2.4% to ₹284.90 on the BSE. This comes as another challenge for Zomato, which is also facing antitrust scrutiny for allegedly violating competition laws and favoring certain restaurants on their platforms. Despite these issues, Zomato's shares have more than doubled this year amid heightened food ordering activity and quick-commerce growth.