Zomato trades lower on Rs 402-crore show-cause notice for GST dues

Zomato shares traded 2 percent lower on December 28 after the food delivery aggregator received a Rs 402-crore show-cause notice from the goods and services tax (GST) authorities over unpaid dues. The tax amount alleged in the notice is based on the sum collected by the company as ‘delivery charges’ from customers on behalf of the delivery partners.

The show-cause pertains to an alleged tax liability worth Rs 401.7 crore along with interest and penalty for the period between October 29, 2019, and March 31, 2022. The tax demand has been made under Section 74 (1) of the Central Goods and Services Tax Act, 2017.

At 9:27am, the Zomato shares were trading down 2 percent at Rs 124.50 on the National Stock Exchange (NSE). The stock has risen nearly 10 percent in the last one month.

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Zomato “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”, the company said in a regulatory filing.

“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. The company will be filing an appropriate response to the show cause notice (SCN),” it said.

Zomato has highlighted that no order of any kind has been passed against the company and they have made this disclosure just as a matter of caution given the amount of tax in question. Zomato believes that it has a strong case on merit.

The show-cause notice amount of Rs 402 crore from the GST authorities is substantial when compared to Zomato’s reported financial figures in the September quarter.

In the context of the company’s financials, the net profit for the second quarter of FY24 stood at Rs 36 crore, whereas the revenue generated was Rs 2,848 crore. The alleged tax amount is over 1000 percent higher than company’s reported net profit.

Also Read | Strongly believe we’re not liable to pay any tax on delivery charge, says Zomato

Shares of Zomato ended 1.5 percent higher on December 27 at Rs126.85 on NSE. The stock has surged 110 percent so far in 2023, massively outperforming benchmark Nifty 50 which has risen 19 percent during this period.

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