Zomato denies any liability for Rs 401 crore GST against show cause notice from DGGI

In the latest development, the online food delivery giant Zomato has denied any liability for Rs 401 crore GST notice issued by the Directorate General of GST Intelligence (DGGI).

The company in its response has said that they are ‘not liable’ for the Goods Service Tax (GST).

According to the sources, the notice to the food delivery company has been issued under Section 74(1) of the Central Goods and Services Tax Act, 2017, demanded an explanation from Zomato regarding an alleged tax liability amounting to Rs 401.70 crore, which also includes interest and penalties for the duration spanning from October 29, 2019, to March 31, 2022.
The delivery charges collected by Zomato from its customers on behalf of their delivery partners has been targeted in the notice mentioning the aforementioned period.

The company in its response said, “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.”

Zomato also stated that it would be developing and presenting a thorough response to the show cause notice in its filing with the Bombay Stock Exchange (BSE). 

The business stated that it does not think it should be subject to the purported tax demand and that it is confident in the strength of its argument.

Zomato further emphasised that, given the size of the tax demand in question, the disclosure was done willingly and cautiously and that no order of any type had been passed up to this point. 

Meanwhile, Zomato's stock dropped more than 3% after the revelation, but this was only a minor setback compared to the significant increase the company has had this year, its shares have increased by more than 100% in this year.

What did DGGI's Argument says?

According to the sources, the DGGI believes food delivery is a service and Zomato is liable to pay 18% GST on delivery charges since July 2017, which come to Rs 401 crore notice from the period of July 2017 to March 2023.