Zomato has received a discover from GST authorities demanding Rs 803 crore in excellent tax, together with penalty and curiosity, protecting the interval from 2019 to 2022. The dispute facilities on whether or not meals supply platforms are required to pay tax on their collected supply charges, a matter of competition between these aggregators and the federal government.
Following a present trigger discover issued to Zomato in December, the GST authorities proceeded with the tax demand after evaluating the corporate’s response.
The Rs 803.7 crore tax demand exceeds Zomato’s complete income since attaining profitability within the April-June 2023 interval.
The firm recorded Rs 351 crore web revenue in fiscal 12 months 2024, while the primary half of the present fiscal 12 months confirmed income of Rs 429 crore.
Why has Zomato received the GST discover?
- Section 9 (5) of the Central GST Act specifies that platforms aggregating companies throughout sectors, together with meals supply, journey hailing and ecommerce, are chargeable for gathering and paying oblique tax on behalf of their service suppliers.
- According to GST laws, meals supply companies entice an 18% tax fee. The authorities maintains that platforms should pay tax on their service charges since they’re gathering these expenses.
- The substantial tax quantity covers the interval from October 2019 to March 2022. GST authorities contemplate supply as a service, making the charges collected by Zomato throughout this timeframe taxable.
- Delivery platforms clarify that while they accumulate supply expenses from clients, these are transferred to supply companions. A meals supply government advised ET: “In a large number of cases, customers are charged no delivery fees or discounted fees…but the delivery partners are still paid as per a standard per km fee basis. That’s the burden the platform takes to drive growth. .”
Since January 1, 2022, digital meals ordering companies aggregating eating places should accumulate and provides GST for restaurant gross sales via their platforms. However, the laws remained unclear concerning supply charge taxation.
Industry organizations have requested the GST Council to supply readability on whether or not supply expenses fall underneath taxable elements, however no decision has been reached.
Zomato’s response to tax evaluation:
The firm plans to problem the tax demand via authorized channels, starting with the GST Appellate Tribunal, with potential for additional court docket proceedings.
A tax specialist famous: “This will be a long-drawn battle before any material outcome emerges.”
What are the potential penalties?
The decision of this challenge could also be extended on account of anticipated appeals from each the group and regulatory our bodies. A authorized ruling mandating tax on supply expenses collected for gig employees might set up a precedent. This might have an effect on numerous sectors using gig employees for deliveries, together with on-line grocery platforms, e-pharmacies and native logistics companies.
Has this tax scrutiny been restricted to Zomato?
Swiggy, the Bengaluru-based competitor of Zomato, received a present trigger discover in December concerning comparable considerations, with unpaid tax amounting to Rs 326.8 crore. However, Swiggy has not but received a formal demand discover.
