As is the flavour of the season, there’s some more stink coming up in the food startup sector. At first Spoonjoy decides to scale down its operations, then in an ominous series of events, food startup Dazo shuts down, TinyOwl fires 600 people followed closely by Zomato. And now, for the second time around, food ordering marketplace Foodpanda doesn’t seem to be having the best of times of late.
That all is not healthy at the food tech startup first came to light when Livemint did an expose of some of the malpractices and supposed incidents of mismanagement at Foodpanda. The main incriminating claims against the food startup were that it still continues to have restuarants that have shut down listed on the site, either to fudge sales numbers or sheer out of lack of due diligence. The report went on to reveal how a huge number of restaurants have been taking Foodpanda for a ride by building fake orders to themselves on a 30% discount that Foodpanda has been floating for a while, claiming the full price from Foodpanda, while making no deliveries.
And lastly, the report also threw light on cases of mismanagement, employee negligence and hinted at possible embezzlement at the hands of some high-level executives who pulled strings to sign up their own companies for Foodpanda’s service mandates, and having spun-off a Foodpanda-like startup of his own.
If the hard-hitting article has thrown a spanner in Foodpanda’s works, we can’t be sure. The company has continued bombardng its users with the massive 30-50% discounts and on the face of it, it looks ever more determined to rise to the top, beating many food tech competition in the way.
However, bad PR seems to yet again plague the food startup. Now, law students Pranav Jain and Aroon Menon from Delhi have moved to court accusing Foodpanda of miscalculating the VAT charges on bills, subsequently misappropriating their total taxes and charges due to the govenrment, and also cheating customers in the process.
The students who had designed an app to help people calculate the total amount of VAT and service tax payable on food, allege that over the course of time and usage of the website and application (app), it was discovered that numerous customers of Food Panda website or app were being charged taxes that were wrongly calculated leading to customer paying more to FP than was actually required as per law.
VAT or Value Added Tax is VAT (Value Added Tax) is a tax applicable on food items that are prepared in the restaurant as they add value before serving it to you, and it differs from 5 percent to 20 percent depending upon the state you are dining in and is different across states. VAT is applied on the sub-total of the bill (And not the total of the bill that includes the servcie tax)
Upon ordering from 2 different eateries on Foodpanda, Pranav and Aroon found that the VAT on both the occasions had been wrongly worked out. Instead of calculating the tax as a percentage of the sub-total, it had been determined on an amount that included the sub-total and the service tax.
We at OfficeChai attempted to corroborate some of these allegations with our own bills from Foodpanda. While out of the 5 bills, there was only a single case where the VAT was over-charged, it was amply clear that in most cases both the VAT and Service Tax has been wrongly calculated and the numbers seemed rather random. ( Higher or lower) It’s also not clear either whether the discount was factored in before or after adjusting the VAT and Service taxes.
A straight case of miscalculation of VAT. At 14.50% of Rs. 270 the VAT is wrongly worked out to be Rs. 34.19 instead of the correct 39.15.
While the VAT of 13.58% is applied on the discounted bill amount (360-108- 252), it’s unclear how the service tax is worked out to be Rs. 15.69 when it should be Rs. 17.96 on non-discounted bill amount of Rs. 360 or Rs. 12.57 on the discounted amount of Rs. 252.
Here again the VAT at 14.50% should either be Rs. 25.65 applied on the discounted bill of Rs. 175 ( 250-30% discount) or Rs 36.25 on the total amount of Rs 250. The amount of Rs. 26.75 is wrong.
While unclear about Foodpanda’s real intentions on such discrepancies and inconsistencies in the bill breakup, even if of a small value, it looks like there is an urgent need of quality control and strict accounting clean-ups in the company, lest it meet the same fate as another company backed by the same parent- Rocket Internet, Jabong.