Zomato: Zomato receives Rs 402 crore show cause notice over unpaid GST on delivery charges

Online food ordering platform Zomato has received a Rs 402 crore show cause notice from the goods and services tax (GST) authorities over unpaid tax on delivery charges collected from customers, the company said in a BSE filing late Wednesday.

The Gurugram-based company said it received the notice on December 26 to show cause as to why an alleged tax liability of the said amount for the period October 29, 2019 to March 31, 2022 should not be demanded from the company.

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In November, the Directorate General of GST Intelligence (DGGI) had issued pre-demand notices to Zomato as well as its Bengaluru-based rival Swiggy, seeking GST of Rs 750 crore.

The key point of contention here is that the government is asking the food delivery platforms to pay GST on delivery fees collected by them from the customers, whereas the companies argue that the said charges are only collected on behalf of delivery partners.

“The company strongly believes that it is not liable to pay any tax since the delivery charge is collected by the company on behalf of the 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 SCN (show cause notice),” it said in the filing.

Also read | Tax troubles: Swiggy and Zomato grapple with freshly served GST notice on delivery fee

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Beginning January 1, 2022, food delivery platforms are liable to collect and deposit GST on behalf of restaurants for sales made through them. However, no clarity was provided on the delivery fee component.Typically, in the case of aggregators like Zomato and Swiggy, gig workers operate as delivery partners, and are paid based on the orders serviced. Users are charged a fee for this delivery, except in loyalty programmes under which the platforms waive the charges.

ET had reported on November 24 that the companies were engaging with lawyers and tax consultants while also planning to approach the government to clarify their stance.

“At this stage, no order of any kind has been passed and as mentioned above, the company believes that it has a strong case on merit,” Zomato said in its filing.

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