Zomato told to cough up Rupees 401 crore as GST on delivery charges

Zomato told to cough up Rupees 401 crore as GST on delivery charges

The Goods and Services Tax (GST) authorities have sent showcause notices to several listed companies, including Zomato, Bata India, ICICI Bank and Kotak Mahindra Bank in the past few days for non-payment of taxes, according to separate statements issued by the companies.

On Tuesday, Zomato told the exchanges that the Directorate General of GST Intelligence (DGGI) sent a showcause notice to the company, asking why an alleged tax liability of Rupees 401 crore along with interest and penalty for the period October 29, 2019 to March 31, 2022, should not be demanded from them.

Experts say that since Zomato and Swiggy are delivery platforms, they are not liable to pay GST for services provided by the delivery partners. “The delivery partners, who are known as gig-workers, are independent contractors and they are not employees of the platform. As delivery charges are the revenue of delivery partners, the platforms are not liable for GST,” said Darshan Bora, partner, Economic Laws Practice.

In cases, where a company merely facilitates the collection of delivery charges on behalf of third-party partners, liability to GST would be dependent on the income earned by such third-party partners. Whereas, when a company deploys its own employees for delivering food to customers, it could be said that the company provides delivery services to customers, and accordingly be liable to discharge GST thereon, say experts.

Sanjay Chhabria, director, indirect tax at Nexdigm, said, “It won’t be a surprise if other industry players, food delivery apps and others resorting to such platforms like Zepto, FoodPanda, Dunzo, Eatfit etc, receive similar demands from the GST authorities.”

Since January 2022, Swiggy and Zomato have been obligated to remit GST for restaurant services conducted via their apps, yet there has been a lack of clarification regarding the levy of GST on delivery charges.

Meanwhile, on Thursday, ICICI Bank informed the exchanges that tax authorities have issued a demand notice of Rupees 26.8 crore, alleging a shortfall in GST payment.

The bank received a GST demand worth Rupees 24.38 crore, accompanied by a penalty of Rupees 2.44 crore on Wednesday. The demand pertains to the assessment of tax payment under Section 73 of the Tamil Nadu Goods and Services Tax Act, 2017.

Kotak Mahindra Bank announced that it received a GST demand notice of Rupees 0.62 crore on Wednesday. The demand stems from the disallowance of input tax credit (ITC) on specific expenses incurred during the fiscal years FY18 and FY19.

Footwear major Bata India disclosed that it received a tax penalty notice amounting to Rupees 60.56 crore for the financial year 2018-19. The company’s exchange filing said that authorities are seeking additional information on – difference in turnover on outward supplies in the monthly GST returns, difference in tax on outward supplies in the GSTR-9 & GSTR-9C returns, excess ITC availed, and ITC reversal on credit note. The next personal hearing in the said matter is scheduled on January 10, 2024, Bata India said.

Mahindra and Mahindra told the exchanges that tax authorities have imposed a penalty of Rupees 0.56 crore on the company for erroneously carrying forward input service distributor credit from the pre-GST era to the GST regime, specifically in relation to its two-wheeler business.