Zomato Receives ₹11.81 Crore GST Demand and Penalty Order, Plans to Appeal

Zomato, the popular food delivery firm, received a tax demand notice amounting to ₹11.81 crore from the Additional Commissioner, Central Goods and Services Tax, Gurugram. The order pertains to the period from July 2017 to March 2021.

The tax demand consists of ₹5.9 crore in GST and an equal amount of ₹5.9 crore as a penalty. The order was issued regarding the export services provided by Zomato to its subsidiaries located outside India during the specified period.

In response to the order, Zomato has stated that it plans to file an appeal against the decision before the appropriate authorities. The company believes it has a strong case to defend the matter and does not expect any financial impact from the penalty.

Zomato had earlier provided clarifications along with supporting documents and judicial precedents in response to a show cause notice from the authorities. However, it appears that these explanations were not appreciated by the authorities while passing the order.

Why this matters: The GST demand and penalty order received by Zomato highlights the complex tax compliance challenges faced by digital platforms operating across borders. The outcome of Zomato's appeal could set a precedent for similar cases in the e-commerce and food delivery sectors.

A Zomato spokesperson said, "We have received the order from the Additional Commissioner, Central Goods and Services Tax, Gurugram, raising the GST demand of ₹5,90,94,889 with applicable interest and penalty of ₹5,90,94,889. We believe we have a strong case on merits and plan to file an appeal against the order."

This is not the first time Zomato has faced tax-related issues. Earlier this month, the company also received notices from the tax authorities in Delhi and Karnataka over alleged short payment of GST in 2018 amounting to ₹4.2 crore.

Despite the tax challenges, Zomato has shown strong financial performance recently. In the third quarter of the last financial year, the company registered a profit of ₹125 crore, marking an improvement of ₹390 crore compared to the same quarter in the previous year.

As Zomato prepares to appeal the GST demand and penalty order, the company remains confident in its compliance with tax regulations. The food delivery giant intends to present its case to the authorities and resolve the matter without any significant financial implications. The outcome of the appeal will be closely watched by industry stakeholders and could have broader implications for the e-commerce sector's tax compliance practices.

Key Takeaways

• Zomato received a ₹11.81 crore GST demand notice from tax authorities.
• The demand consists of ₹5.9 crore in GST and an equal penalty amount.
• Zomato plans to appeal the order, confident of a strong case and no financial impact.
• This is not the first tax-related issue for Zomato, which also faced a ₹4.2 crore notice.
• The outcome of Zomato's appeal could set a precedent for the e-commerce sector's tax compliance.