In a recent development, Zomato and Swiggy, the two prominent players in India’s food delivery market, have reportedly been issued Goods and Services Tax (GST) notices totaling ₹750 crore by the Directorate General of GST Intelligence (DGGI). The tax authorities consider the delivery service provided by these platforms as subject to GST, leading to the issuance of the notices.
Zomato, holding the largest share in the online food delivery market in India, has received a GST notice of ₹400 crore, while Swiggy has been served a notice of ₹350 crore, according to sources cited by CNBC-TV18. The taxation body has found both companies liable for GST payment for the period spanning from July 2017 to March 2023.
The tax notices to Zomato and Swiggy come as the DGGI classifies food delivery as a service, making both companies subject to GST regulations. While the exact details of the allegations and assessments remain unclear, this development underscores the increased scrutiny faced by digital platforms and the evolving regulatory landscape in India.
Neither Zomato nor Swiggy has responded immediately to the reports, and Livemint could not independently verify the information.
Zomato, which is a publicly listed entity, recently announced its earnings for the quarter ending September 2023. The company reported a net profit of ₹36 crore, a significant improvement from the net loss of ₹251 crore during the same period last year. The revenue from operations witnessed robust growth, reaching ₹2,848 crore, marking a 72% increase compared to ₹1,661 crore in the corresponding period last year.
On the other hand, Swiggy, an unlisted entity, achieved profitability, according to its CEO Sriharsha Majety. In a blog post from May, Majety mentioned that Swiggy turned profitable in the quarter ending March 2023.
The scrutiny by tax authorities and the issuance of substantial GST notices indicate the challenges faced by food delivery aggregators in navigating regulatory frameworks and tax compliance. As the digital economy continues to evolve, these developments highlight the need for comprehensive and clear regulations governing the taxation of services provided by such platforms.
In the trading session on November 22, Zomato’s stock settled at ₹115.25 on the BSE, experiencing a 1.07% decline from the previous day’s close. The implications of the GST notices on the financials and operations of both Zomato and Swiggy remain to be seen as the situation unfolds.