CarTrade Gets Demand Letter From I-T Dept For Tax Shortfall

The Income Tax (I-T) Department has issued a demand letter to auto marketplace CarTrade for shortfall in payment or collection of tax deducted at source (TDS) or tax collected at source (TCS). 

In a filing with the BSE, CarTrade said that the startup received the demand notice for INR 15.79 Lakh (INR 15,79,805 to be precise) on June 21. 

“The Income Tax Department has issued (a) demand letter against outstanding TDS demand of INR 15,79,805/- with regards to late filing/ interest on late payment/ manual demand/ short payment…,” said CarTrade in the filing.

CarTrade said that the demand letter would have “no material impact” on the financial and operational performance of the company. 

“The company will file necessary rectification to rectify the demand and take necessary action in this regard,” it added.

There was no clarity on the accounting year for which the demand was raised by the I-T Department. For the uninitiated, the demand notice includes tax, penalty and interest payable by a company for settling outstanding dues. 

The development comes at a time when more and more startups have come under the lens of authorities. A recent report said that a startup was directed to settle a tax and penalty amounting to INR 37 Cr on account of INR 40 Cr funding secured by the startup.

On the other hand, GST authorities have also been actively cracking the whip on new-age tech companies for tax-related issues. The situation has been especially dire for foodtech major Zomato, which received a goods and services tax (GST) penalty notice of INR 2 Cr from Delhi’s sales tax officer for FY19. In April, it also received a GST notice of INR 11.8 Cr from Gurugram GST authority.

In the same month, Karnataka GST authorities directed Zomato to pay a service tax of INR 92 Cr and a separate GST notice of INR 23.26 Cr for FY19.

Meanwhile, the worst hit have been online gaming companies which have been reeling under the impact of GST Council’s decision last year to levy 28% tax on the industry. The Directorate General of Goods and Services Tax Intelligence (DGGI) has issued notices totalling over INR 1.12 Lakh Cr to multiple online gaming companies.

The tax notice comes at a time when CarTrade is on an upward spiral. The auto marketplace returned to the black in the fourth quarter (Q4) of FY24 with a net profit of INR 25 Cr, up 43% year-on-year (YoY) from INR 17.5 Cr in the year-ago period. 

Meanwhile, operating revenue soared 51.5% to INR 145.3 Cr in Q4 FY24 compared to INR 95.9 Cr in Q4 FY23. 

Banking on this, brokerage firms are bullish on the startup. Last month, Goldman Sachs increased its stake in the startup to 5.15%, becoming a substantial shareholder. 

CarTrade shares closed 3.67% higher at INR 856.90 on the BSE on Friday (June 21).