Food Fight: Zomato may be looking at minimum 3 yrs of litigation

Taxation experts say that Gurugram-based food delivery service Zomato might have to fight litigation for three to five years as it has said that it “strongly believes” it is not liable to pay any goods and services tax (GST) on delivery charges since the amount is collected on “behalf of delivery partners.”

“Tax disputes usually take considerable time to be resolved. The courts are still hearing matters pertaining to service tax and excise (predecessors of GST). So we can expect this issue to take at least three to five years to be resolved,” said Ankit Jain, Partner, Ved Jain & Associates, a tax consultancy.

In November 2023, it was reported that the Directorate General of GST Intelligence (DGGI) had issued a demand notice to Zomato and rival Swiggy, asking them to clear pending tax dues of Rs 400 crore and 350 crore, respectively. The GST demand was calculated based on the delivery fees the two companies collect on each order.

The DGGI said that food delivery is a service and, therefore, Zomato and Swiggy are liable to pay GST on their services at a rate of 18 percent. The industry view, however, was that the two companies are mere platforms and they only collect the delivery fee on behalf of gig workers, to whom the entire amount is transferred. Hence, the tax burden falls on the workers and not on Zomato or Swiggy.

Read more at: moneycontrol