Zomato gets GST demand worth Rs 8.6 crore from Gujarat for availing excess input tax credit

Food delivery company Zomato, which battles with Swiggy, has been hit with a substantial GST demand by the Deputy Commissioner of State Tax, Gujarat.

Following an audit of the company's GST returns and accounts for the fiscal year 2018-19, the authorities have identified discrepancies. The audit uncovered issues related to the excess availment of input tax credit and short payment of GST, leading to a demand order totaling Rs 8,57,77,696.

The sum includes the principal GST amount of Rs 4,11,68,604, alongside interest and penalties.

"This is to inform that the Company has received an order for FY 2018-19 pursuant to the audit of GST returns and accounts by the Deputy Commissioner of State Tax, Gujarat raising demand of GST of INR 4,11,68,604/-, along with applicable interest and penalty totaling to INR 8,57,77,696/-," said Zomato Limited in its stock exchange filing.

Zomato's response to the order

In response to the GST demand, Zomato has articulated its stance, emphasizing its belief in having a strong case. The company had previously addressed the issues raised by providing clarifications, supported by relevant documents and circulars.

However, Zomato suggests that these submissions were not fully considered by the tax authorities when the order was passed. Asserting confidence in its position, Zomato intends to challenge the order before the appellate authorities, anticipating no financial impact from the dispute.

The financial implications

The demand order issued to Zomato is broken down into three components: the GST due, interest charges, and penalties. Specifically, the order includes a GST demand of Rs 4,11,68,604, interest of Rs 4,04,42,232, and a penalty of Rs 41,66,860. 

Previous encounters with GST notices

This is not Zomato's first encounter with GST-related notices. In December 2023, the company received a show cause notice demanding Rs 402 crore for unpaid GST on delivery charges.

The notice also encompassed interest and penalty charges related to the collection of delivery fees from customers between October 29, 2019, and March 31, 2022. These repeated tax challenges underscore the regulatory scrutiny Zomato faces in its operations.