Zomato receives a notification of Rs 402 crore in unpaid GST, company disputes the charges

28 Dec 2023 , 12:44 PM

Zomato, an online meal ordering platform, announced in a late-Wednesday BSE filing that it has received a show-cause notice of Rs 402 crore from the goods and services tax (GST) authorities regarding unpaid tax on delivery charges collected from users.

The Gurugram-based business claimed that as it only receives payments on behalf of its delivery partners, it is not responsible for paying these taxes. Zomato promised to respond to the notice in writing. The tax notice is applicable for the time frame of March 31, 2022, to October 29, 2019.

Zomato and its rival Swiggy, based in Bengaluru, received pre-demand notices from the Directorate General of GST Intelligence (DGGI) in November, requesting 750 crore in GST.

What’s at stake: The main point of dispute is that food delivery platforms are being asked by the government to pay GST on delivery costs that they collect from clients, but the companies counter that they merely collect these fees on behalf of their delivery partners.

‘The corporation is adamant that since it collects the delivery charge on behalf of the delivery partners, it is exempt from paying any taxes. Furthermore, the delivery partners have given the customers—not the company—delivery services in accordance with the mutually agreed-upon contractual terms and conditions. The judgements of our outside tax and legal counsel also support this. According to the filing, ‘The company will be filing a suitable response to the SCN (show cause notice).’

Food delivery platforms will be responsible for collecting and depositing GST on behalf of restaurants for transactions made through them as of January 1, 2022. On the other hand, the delivery fee component was not made clear.

Gig workers typically work as delivery partners for aggregators like Zomato and Swiggy, and they are compensated according to the number of orders they fulfil. Except in cases where the platforms waive the fees due to loyalty schemes, users must pay a price for this delivery.

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