Zomato slapped with Fresh GST Penalty and Demand of 2 crore

Zomato, a prominent food delivery platform in India, is currently facing a new challenge in the form of a penalty and a demand for Rs. 2 crore due to Goods and Services Tax (GST) issues. This situation highlights the intricate nature of tax compliance within the digital economy and emphasizes the obstacles that technology companies encounter while operating in India.

Zomato has been penalized by the GST department for a suspected failure to comply with GST regulations. Along with a demand of  Rs. 2 crore, the penalty suggests that there are inconsistencies in Zomato’s GST filings and adherence to procedures. Although the foodtech giant mentioned that “we believe that we have a strong case on merit and the company will be filing an appeal against the order before the appropriate authority,” So we might get to see a clash between the foodtech giant Zomato and the tax authority in court.

This development is hot-picking because of the previous GST demand and penalty that Zomato received, which amounted to Rs 11.81 crore and a demand of Rs 5.9 crore for the period July 2017 to March 2021.

Also, the encounters between the tax authorities and Zomato are quite regular these days. Earlier this month, the company stated that they were receiving notices from the tax authorities for a tax violation of a short payment of the Goods and Service Tax, which amounts to Rs 4.2 crore in the states of Delhi and Karnataka.

Impacts after the penalty:

Zomato has to face various impacts after the penalty was imposed; here are some of the impacts:

Financial Impact: The penalty and demand of 2 crore rupees will act as a great financial liability for Zomato. It may hamper the company’s cash flow and profitability.

Impact on the reputation: The damage to the reputation of Zomato will be more severe than the financial penalty of Rs 2 crore.

Disturbance with business operations: Resolving any legal issue requires quite a lot of time, effort, and resources. This can divert Zomato’s focus from effective and efficient business operations. Disturbances in business operations can lead to dissatisfied customers and a drop in service quality.