Zomato gets Rs.402 crore GST fine for non-payment of customer delivery charges

Zomato Ltd., the renowned food delivery company, reported on December 28 that it had received a show cause notice (SCN) from the Goods and Services Tax (GST) office. The notice mentions an alleged tax liability of Rs. 401.7 crores, plus interest and penalty, relating to the collection of delivery fees from customers between October 29, 2019, and March 31, 2022.

Zomato reported in an exchange filing that the show cause notice (SCN) was issued by the Directorate General of GST Intelligence, Pune Zonal Unit, under Section 74(1) of the Central Goods and Services Tax Act, 2017.

The company must make a case explaining why the alleged tax liability of Rs. 4,01,70,14,706, plus interest and penalties, should not be demanded. The notice is related to the delivery charges collected by Zomato on behalf of delivery partners within the provided time.

Despite the tax-related investigation, Zomato’s stocks closed higher on December 27, gaining 1.64% on the BSE at Rs. 127.05 and 1.48% on the NSE at Rs. 126.85. The company explained that the reported amount in the Show Cause Notice (SCN) is generated from delivery expenses.

In a related development, Zomato Live Entertainment, the company’s events division, is expanding. The company intends to expand into new cities and develop new intellectual properties (IPs). This strategic move coincides with Zomato’s recent creation of a dedicated tab on its app, which allows users to explore and engage with planned events in many cities.

Zomato Live CEO Zeenah Vilcassim gave insights into the company’s growth strategy, aiming for a significant double-digit contribution to Zomato’s topline within three years. Zomato Live, which currently contributes a single-digit proportion of Zomato’s overall income, strives for significant growth, highlighting the company’s scope and size.

While Zomato is dealing with the GST notice, its concurrent entry into the live entertainment market demonstrates the company’s commitment to diversifying and improving its products.

Zomato’s development into new locations and the live entertainment domain highlights its strategic goal for comprehensive growth in the dynamic landscape of food and entertainment services.