Zomato gets ₹ 401 crore show-cause notice over delivery charges

livemint.com:

₹ 401.7 crore show-cause notice from the Directorate General of GST Intelligence for delivery charges collected over two and a half years. The notice, dated 26 December, asks why Zomato shouldn't be liable for this tax amount, including interest and penalties, for the period from 29 October 2019 to 31 March 2022. Zomato, in a notification to stock exchanges on Thursday, refuted the claims, arguing that it was “not liable" to pay any tax on the delivery charges, as these are collected on behalf of 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. 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 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 that no official order has been issued yet, and believes that it has a strong case.

The company's disclosure is a precaution, given the magnitude of the alleged tax demand. “Currently, only a show cause notice has been issued wherein on the basis of examination of the documents of Zomato, the GST authorities have asked Zomato to explain the transaction. Zomato will get an opportunity to present its understanding of the transaction and explain why it believes that the given delivery charges don't attract GST.