HomeLegal AdviceZomato Receives GST Demand Notice of ₹ 402 Crore

Zomato Receives GST Demand Notice of ₹ 402 Crore

In a recent development, Zomato Ltd, the leading food delivery platform, finds itself in the crosshairs of the Goods and Services Tax (GST) Department, receiving a demand notice of a staggering ₹ 402 crore. The notice, served on December 26 by the Pune Zonal Unit of the Directorate General of GST Intelligence, pertains to alleged non-payment of taxes on delivery charges collected from customers on behalf of delivery partners spanning from October 29, 2019, to March 31, 2022.

The Regulatory Landscape: Zomato’s Response

Zomato, in a regulatory filing, asserted that it is not liable for paying any tax on the said charges. The company contends that the delivery charges were collected on behalf of the delivery partners, who directly provided services to the customers. The notice, issued under Section 74 (1) of the Central Goods and Services Tax Act, 2017, has prompted Zomato to seek opinions from external legal and tax advisors.

Despite the formidable demand, Zomato remains resolute in its position, stating, ‘It’s important to note that no order has been issued against the company at this stage. The company believes it has a strong case on merit.’ The company is gearing up to submit a comprehensive response to the show cause notice.

Differing Opinions: Tax Experts Weigh In

The disagreement between tax experts and the GST Department regarding the GST demand on delivery charges adds complexity to the situation. Nitin Jain, a partner at SW India, argues that the delivery fee constitutes payment for an independent service to the customer and should be considered the revenue of service providers rather than the platform. He suggests that if the government aims to collect tax on these charges, amendments to the law should be prospective, placing liability on e-commerce platforms.

Industry Ripples: ICICI Bank and Kotak Mahindra Bank in the Mix

In a parallel development, ICICI Bank and Kotak Mahindra Bank have also found themselves on the receiving end of GST Department demands. ICICI Bank disclosed a demand notice from the Tamil Nadu Goods and Services Tax Department, seeking ₹ 24.37 crore along with a penalty of ₹ 2.43 crore. The notice is rooted in an assessment of tax payment under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017. ICICI Bank has swiftly announced its intention to appeal against the order.

Simultaneously, Kotak Mahindra Bank faced show-cause demand orders from the assistant commissioner of central goods and service tax (GST) and excise in Cuttack, Odisha, further highlighting the intensified scrutiny on financial institutions.

As the drama unfolds, the Indian business landscape watches closely, awaiting Zomato’s strategic response and potential ramifications for the broader e-commerce sector. The dispute underscores the evolving dynamics of taxation in the digital age and the need for legal clarity in navigating the complexities of platform-based revenue models.

Monika Shanmugam