Zomato Hit with 8.5 Crores Penalty by Gujarat GST Dept over excess ITC Availment and Short Payment of GST

The Gujarat GST department has issued an 8.5 crore Goods and Services Tax ( GST ) demand against the food delivery app giant Zomato. The GST Notice specified a GST amounting to Rs. 4,11,68,604, along with relevant interest and penalties, totaling Rs. 8,57,77,696 for the financial year 2018-19. In a regulatory filing to the stock exchanges, Zomato stated that the demand order pertains to the excess utilisation of input tax credit ( ITC ) and Short payment of GST.

Zomato mentioned that, “The company has received an order for FY 2018-19 following the audit of GST returns and accounts by the Deputy Commissioner of State Tax, Gujarat, which raises a GST demand of ₹4,11,68,604/-, along with applicable interest and penalty totaling ₹8,57,77,696.” The company addressed all concerns and furnished pertinent documents, circulars, etc. Zomato asserted that it seems these were not entirely taken into consideration by the authorities when issuing the order. In December last year, Zomato faced a denial of GST liability amounting to 402 crores.

The notice argued that delivery charges should be classified under the services category, thus subjecting them to an 18% GST. This dispute arose amidst the structure of customer bills for food orders on platforms like Zomato and Swiggy, which typically include three components: food prices, delivery charges ( often waived for platform subscribers ), and a 5% tax on both food and platform fees. Changes in the tax regulations were evident, especially with the GST council’s introduction of a 5% tax on food delivery services in January 2022. Consequently, platforms began remitting GST under the category of ‘restaurant services.’ Subsequently, the company has increased its platform fee from Rs. 2 to Rs. 3.

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