Zomato GST Tax Demand: Key Updates on Rs 803 Crore Case - Read Now
Zomato Ltd., the popular online food delivery platform, is in the spotlight after receiving a significant GST tax demand of ₹803.40 crore. This demand includes ₹401.70 crore in GST, interest, and an equivalent penalty. The issue stems from the alleged non-payment of GST on delivery charges collected between October 2019 and March 2022.
The company disclosed that it plans to appeal against the order issued by the Joint Commissioner of CGST & Central Excise, Thane Commissionerate, Maharashtra. Zomato insists it has a strong legal case supported by opinions from external legal and tax advisors.
Understanding the GST Tax Demand
Zomato’s tax troubles began last year when it received a show cause notice (SCN) under Section 74(1) of the Central Goods and Services Tax Act, 2017. The Directorate General of GST Intelligence (Pune Zonal Unit) alleged that Zomato collected delivery charges from customers but failed to pay GST on those amounts.
The company argues that the delivery services were rendered by delivery partners, not Zomato itself, per the contractual terms. Zomato believes this distinction absolves it of direct GST liability.
In its latest disclosure, Zomato clarified that this appeal is being pursued as a matter of caution and does not necessarily indicate an adverse material impact on the company.
Impact on Zomato Shares
Despite Zomato’s strong performance, with a 138% rally over the past year, the company’s shares have recently faced selling pressure. This decline comes amid concerns about Amazon entering the quick commerce space, intensifying competition.
Analysts at JM Financial highlighted that Amazon’s new quick commerce initiative, Tez, is expected to leverage its robust supplier relationships and Prime customer base. This could potentially shift consumer spending from traditional e-commerce to quick commerce, posing challenges for existing players like Zomato, Blinkit, and Instamart.
Market Competition Intensifies
The quick commerce sector has seen a surge in competition, with at least seven players now vying for market share. Amazon’s entry, alongside platforms like Flipkart and Zepto, adds to the challenge for early adopters such as Blinkit and Zomato.
However, experts believe that the market’s overall growth trajectory remains robust. A noticeable shift in consumer behavior toward quick commerce indicates opportunities for all players, even as competition heats up.
What Lies Ahead for Zomato?
As Zomato prepares to appeal the GST tax demand, the company remains confident in its legal stance. It is also navigating increased market pressures due to heightened competition in the quick commerce space.
While the tax demand and Amazon’s entry have raised concerns, Zomato’s growth potential remains intact. Its ability to address legal and competitive challenges effectively will determine its performance in the coming quarters.
