Zomato announced on December 28 that it has received a show cause notice from the GST office, demanding an explanation for a supposed tax liability of ₹401.7 crore, including interest and penalty. This liability pertains to the delivery fee collection from customers between October 29, 2019, and March 31, 2022.

What Happened? The notice, issued under Section 74(1) of the Central Goods and Services Tax Act, 2017 by the Directorate General of GST Intelligence, Pune Zonal Unit, was disclosed by Zomato in a stock exchange filing.

Zomato maintains that, based on contractual terms and external legal and tax advice, the delivery partners, not Zomato, provide the delivery services to customers.

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The food delivery company plans to respond appropriately to the Show Cause Notice (SCN) and believes it has a strong case. The company made this disclosure voluntarily, citing the significant size of the alleged tax demand.

Zomato also clarified that typically, orders with penalties or material impact litigation require disclosures, and at this stage, the company has not received any such order.

Price Action: Zomato’s shares opened in red on Thursday, down 1.69% at ₹124.90 before falling further after market open to ₹124.20.

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