Zomato, Swiggy Slapped With Rs. 750 Crore GST Demand From Tax Authorities

It’s not just Byju’s who’s being accused of not having following taxation laws — Swiggy and Zomato have received a notice from the tax department too.

Zomato and Swiggy have together received a Rs. 750 crore demand notice from the GST authorities, CNBC reports. The demand is over non-payment of GST on the delivery fee collected by these platforms from consumers all the way back from 2017 to the present day. Zomato has allegedly not paid GST dues worth Rs. 400 crore, while Swiggy supposedly hasn’t paid dues worth Rs. 350 crore.

“Directorate General of GST Intelligence (DGGI) has issued a GST demand notice to Zomato & Swiggy after the Pune zone of DGGI initiated the investigation against Zomato & Swiggy on non-payment of GST on delivery fee charged from the consumers for the period between July2017-March 2023,” a source told CNBC-TV18.

It appears that the tax authorities and delivery platforms like Swiggy and Zomato have differing views on how to handle GST on delivery fees. The tax authorities contend that food delivery is a service, so Zomato and Swiggy are liable to pay GST at a rate of 18%. On the other hand, Zomato and Swiggy believe that they are platforms, and only hire gig workers on a per-delivery basis. They believe that they only collect delivery fees which is ultimately paid to the gig worker, so it’s the delivery partner who’s liable to pay GST. Delivery partners, however, typically earn less than Rs. 20 lakh a year making them exempt from paying GST, and thus haven’t paid GST on the payments they’ve received.

Experts say that the real question, therefore, is whether this service is performed by the platform or by the delivery personnel directly. “It is understood that both the platforms — Swiggy and Zomato are likely to contest the demand as they are currently in talks with the GST Authorities explaining their point of view,” a sources said.

It’s not surprising that such misunderstandings have cropped up in recent times — platform companies and gig workers are a fairly recent phenomenon, and it’s likely that our tax code doesn’t provide adequate clarity on how such issues are to be handled. But as things stand, it does appear that tax authorities believe that they’re owed money by Swiggy and Zomato, and if they’re forced to cough up the amounts, it could have a bearing on their businesses — Zomato is publicly traded, and a sudden Rs. 400 crore expense could cause movements in its stock price. Also, in the longer term, if these GST payments become the norm, it’s possible that food delivery companies pass on these costs to customers, making food ordering dearer for the end user. But for now, it appears that Zomato and Swiggy will contest the payment, but the demand once again shows how India’s tax authorities — perhaps justifiably — now have a close eye on the country’s burgeoning startup industry.