New Delhi: Food delivery giant Zomato has got a ₹ 401.7 crore show-cause notice for delivery charges collected over two-and-a-half years. The notice, dated December 26, asks why Zomato should not be liable for this tax amount, including interest and penalties, for the period from October 29, 2019 to March 31, 2022.
Zomato, in a notification to stock exchanges on Thursday, refuted the claims, arguing that it is “not liable” to pay any tax on the delivery charges, as these are collected on behalf of delivery partners.
“Furthermore, taking into account the contractual terms and conditions mutually agreed upon, the delivery partners provided the delivery services to the customers and not to the company. This is also supported by opinions of our external legal and tax advisors. The company will submit an appropriate response to the notice of show,” Zomato added.
This tax notice is based on the delivery charges collected from customers. Both Zomato and rival Swiggy have received notices for not paying goods and services tax (GST) on the delivery fees they charge on food orders.
Zomato said no official order has yet been issued, and believes it has a strong case. The company’s disclosure is a precaution, given the size of the alleged tax claim.
“Currently, only a show cause notice has been issued in which based on an examination of Zomato’s documents, the GST authorities have asked Zomato to explain the transaction. Zomato will have an opportunity to present its understanding of the transaction and explain why it believes that the given delivery charges are not attracts GST. Zomato can also get an opportunity to verify the amount of the transaction,” said Ankit Jain, partner, Ved Jain & Associates, a Delhi-based card accounting firm.
Jain explained that if Zomato’s arguments convince the issuing officer, the notice could be withdrawn without any demand. Conversely, if the GST authorities remain unconvinced, they can issue a demand order. In such a case, Zomato would have the option to appeal, requiring a deposit of 10% of the claimed amount with the GST authorities. He anticipates that resolving this dispute could take between three and five years.
In a related development, major footwear retailer and manufacturer Bata India has also received a similar tax notice for ₹ 60.56 crores from the state taxman of Chennai. This notice, served on 27 December, follows an initial audit notification and a subsequent audit report outlining various issues.
“The company initially received a notice of audit in Form ADT-01 on April 27, 2023 and a submission was made against the same along with relevant support. While the final audit report issued in Form ADT-02 on April 25 December 2023 on various Now, the opposite party served a Show Cause Notice in Form DRC-01 on December 27, 2023 offering to pay tax on ₹60.56 crore and interest thereon,” the company said in a stock exchange filing.
The next personal hearing is scheduled for January 10, 2024.
“It is believed that the company has a good case to defend the issues before the appropriate authorities without any significant financial impact,” Bata said.
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Published: 28 Dec 2023, 18:22 IST