Zomato shares drop by 5% amid Rs. 402 crore GST tax notice

On the Bombay Stock Exchange (BSE), shares of Zomato, a food delivery platform, have dropped 5% to Rs. 120.7. The decline was accelerated by the issuance of a Rs. 402 crore show cause notice (SCN) by GST authorities, claiming unpaid dues.

The notice, which was issued on December 26 under Section 74(1) of the Central Goods and Services Tax Act of 2017, was issued by the Directorate General of GST Intelligence, Pune Zonal Unit.

Zomato is required to provide a statement explaining why the alleged tax liability of Rs. 401.7 crore, plus interest and penalties, should not be levied on the firm from October 29, 2019, to March 31, 2022.

Zomato responded to the allegations in an official filing, stating, “The amount claimed in the Show Cause Notice (SCN) depends on the amounts collected by the company as delivery charges from customers on behalf of the delivery partners throughout the referred period.”

The company is convinced that it is not required to pay any tax because the delivery charge is collected on behalf of the delivery partners.”

The company highlighted that the delivery partners, not the company itself, supplied services to customers following the contractual terms and conditions. Zomato intends to respond comprehensively to the show-cause notice.

The stock was trading 3.03% down on the NSE at Rs. 123.20 as of 03:52 PM. Despite the recent setback, Zomato has given investors excellent year-to-date gains of more than 105%.

Zomato also stated in the filing that no official order has been made as of yet and that it is confident in the soundness of its case.