In a startling turn of events, Zomato, the popular food delivery service, has been hit with a formidable show cause notice amounting to a staggering ₹402 crore. The notice, issued by the Directorate General of GST Intelligence on December 26, cites non-payment of Central Goods and Services Tax (GST) on delivery charges.
The directive demands Zomato to elucidate why it has allegedly neglected a substantial tax liability of ₹402 crore, coupled with accrued interest and penalty. The GST charges in question pertain to the period from 29 October 2019, to 31 March 2022, on delivery charges collected from customers.
This development follows a similar notice served to Zomato’s competitor, Swiggy, several months ago, seeking GST payments running into hundreds of crores related to delivery charges.
In response, Zomato has staunchly contested the notice, asserting that it is ‘not liable to pay any tax’ on the delivery charges. The company contends that these charges are collected on behalf of delivery partners and, according to mutually agreed-upon conditions, the partners, not Zomato, provide delivery services to customers.
Clarifying their position, Zomato stated, ‘This is also supported by opinions from our external legal and tax advisors. The Company will be filing an appropriate response to the SCN (show cause notice).
The backdrop of this controversy lies in the obligation imposed on food delivery platforms like Zomato and Swiggy to remit GST to the Centre on behalf of restaurants for sales made through their platforms since 1 January 2022. However, a lack of clarity from the Centre regarding the applicability of GST on delivery fees has created confusion.
Taking a proactive approach, both Zomato and Swiggy are engaging with legal and tax experts to submit an official inquiry to the Centre for much-needed clarification on this matter, as reported by The Economic Times.
As the year draws to a close, Zomato finds itself at the center of this financial storm, navigating the complexities of tax disputes as it strives to ensure clarity and fairness in the evolving landscape of the food delivery industry.
Vakilsearch experts emphasize the significance of clarity in tax regulations. They suggest that the evolving landscape demands a comprehensive understanding of legal nuances to navigate such complexities. The expert opinion underscores the need for collaborative efforts between the government and industry players to streamline taxation in the food delivery sector.
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