Zomato Undermines GST Notice For Rs. 401.7 Crore, Saying "Not Liable To Pay Any Tax"
Food delivery giant Zomato, in response to a Goods and Services Tax (GST) notice for Rs. 401.7 crore tax liability has said that it is not liable to pay any tax. “The delivery charge is collected by the company on behalf of the 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,” the company said in a disclosure statement.
“This is also supported by opinions from our external legal and tax advisors. The company will be filing an appropriate response to the show cause notice,” Zomato said. The Directorate General of GST Intelligence (DGGI) had sent tax notices to Zomato and Swiggy for not paying GST on delivery charges, claiming firms are liable to pay GST of 18 percent with penalties and interest from October 2019 to March 2022 as it is a service.
The penalties and interest occurred due to the inability of the company to pay tax despite having collected it from its customers.
Zomato is a publicly listed firm and said, “A disclosure is required to be made only of orders with penalties passed by authorities or pending litigation or dispute that has a material adverse impact on the company. 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. Hence, this disclosure is being made voluntarily and as a matter of abundant caution given the large alleged tax demand in question.”
In January 2022, the GST council announced a 5 percent tax on food delivery services and added “restaurant services” under the purview of GST, which led platforms like Zomato and Swiggy to pay 5 percent GST as”restaurant services” as they bill the customers for food delivery charges that are not applicable to platform subscribers and a 5 percent tax on food and platform fees.
In October, Swiggy hiked the platform fee on food delivery orders to Rs. 3 from Rs. 2. The rise in platform fees was implemented on October 4, the Business Standard reported. The platform fee is charged along with the delivery charge.
