Zomato Limited, a leading name in India's food delivery and dining industry, has recently come under scrutiny from the GST authorities in Tamil Nadu and West Bengal. The company has received two significant orders for the financial year April 2019 to March 2020, raising concerns about alleged non-compliance with GST regulations.

The first order was issued by the Assistant Commissioner of GST and Central Excise, Nungambakkam Division, Tamil Nadu. This order alleges that Zomato excessively availed input tax credit during the specified period. The adjudication order, passed under Section 73 of the Central Goods and Services Tax Act, 2017 and the Tamil Nadu Goods and Services Tax Act, 2017, demands a payment of INR 81,16,518 (Rupees Eighty-One Lacs Sixteen Thousand Five Hundred and Eighteen) in GST. Additionally, a penalty of INR 8,21,290 (Rupees Eight Lacs Twenty-One Thousand Two Hundred and Ninety) has been imposed, with interest on the GST amount yet to be quantified.

The second order, issued by the Assistant Commissioner of Revenue, Government of West Bengal, concerns the alleged non-payment of GST on delivery charges. This order also falls under Section 73 of the Central Goods and Services Tax Act, 2017 and the West Bengal Goods and Services Tax Act, 2017. Zomato has been asked to pay INR 1,92,43,792 (Rupees One Crore Ninety-Two Lacs Forty-Three Thousand Seven Hundred and Ninety-Two) in GST, along with INR 1,58,12,070 (Rupees One Crore Fifty-Eight Lacs Twelve Thousand and Seventy) as interest and a penalty of INR 19,24,379 (Rupees Nineteen Lacs Twenty-Four Thousand Three Hundred and Seventy-Nine).

The orders were received on 28 August 2024—the first from Tamil Nadu at 2:20 PM and the second from West Bengal at 9:07 PM. Both orders stem from audits conducted by the respective state GST authorities, focusing on the financial activities of Zomato during the 2019-20 fiscal year.

Also Read : India's Digital Transactions Set to Triple by 2028, Driven by UPI and Innovation

In response to these demands, Zomato has expressed confidence in its legal position. The company maintains that it has a strong case on merits and plans to file an appeal against both orders before the appropriate authorities. Zomato had earlier responded to the show-cause notices issued by the GST authorities, providing detailed factual submissions, reconciliations, and references to judicial precedents. However, the company believes that these submissions were not fully appreciated by the authorities while passing the orders.

From a financial perspective, Zomato has stated that it does not expect these orders to have any significant impact on the company's finances. This stance is backed by opinions from external legal and tax advisors, who have assessed the situation and provided guidance on the next steps.

The issue of GST compliance has been a focal point for many companies operating in India's digital and e-commerce space. With the increasing complexity of the GST framework, businesses are often caught in disputes over interpretations of the law, particularly concerning input tax credits and service charges like delivery fees. These disputes, while challenging, are also a testament to the evolving nature of India's tax regulations and the need for companies to stay vigilant and proactive in their compliance efforts.

Zomato, as a key player in the food delivery sector, has always prioritized compliance with regulatory requirements. The company's decision to appeal these orders is aligned with its commitment to upholding the highest standards of corporate governance and ensuring transparency in its financial dealings.

Also Read: Max Estates to Consider Fundraising Up to ₹150 Crores in Upcoming Board Meeting

In the broader context, these developments highlight the ongoing challenges that businesses face in navigating India's tax landscape. As the country continues to refine and enforce its tax laws, companies must remain agile and informed to manage compliance risks effectively. Zomato's case also underscores the importance of robust legal and financial strategies in addressing regulatory challenges.

Looking ahead, the outcome of Zomato's appeal will be closely watched by industry stakeholders and market observers. The company's ability to successfully defend its position could set a precedent for similar cases in the future, potentially influencing how GST regulations are interpreted and enforced across the country.

For now, Zomato is focused on preparing its appeal and ensuring that it can effectively present its case before the appellate authorities. The company remains optimistic about its prospects and is confident that the matter will be resolved in its favor.

As this situation unfolds, Zomato has assured its stakeholders that it will keep them informed of any significant developments. The company also reaffirmed its commitment to maintaining transparency and adhering to the highest standards of regulatory compliance.

This information has been made available on Zomato's official website, reflecting the company's dedication to keeping its investors and the public informed about important corporate matters.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst & Finance Saathi Telegram Channel for Regular Share Market, News & IPO Updates

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX & Upstox.