The Income Tax department is currently investigating a tax evasion case involving foodtech unicorn Swiggy and ecommerce giant Flipkart’s logistics subsidiary Instakart, which is estimated to be worth INR 950 Cr.
According to Business Standard, which first reported the development, tax concealment by Instakart is said to be to the tune of INR 650 Cr, while the remaining INR 300 Cr is by Swiggy. Third-party vendors associated with both companies were reportedly also involved in the concealment of tax.
“The survey operations on the companies resulted in impounding of incriminating documents evidencing tax evasion issues including non-deduction from tax deducted at source (TDS) on commission income and cancellation charges by Swiggy and their restaurants along with shifting of loss from Flipkart to Instakart,” a source told the publication.
Earlier this month, the IT department began conducting surveys at the Bengaluru offices of both Swiggy and Instakart, after an allegedly wrongful input tax credit by both companies under the Goods and Services Tax (GST) system. Flipkart’s Instakart Services was previously accused by tax authorities of using fake GST invoices.
Both companies have claimed that they are cooperating with the authorities and have provided them with necessary information and documents. It is as yet unclear what the next steps would be and whether the companies would have to pay a penalty over and above the amount reported.
Responding to the development, a Swiggy spokesperson told Inc42, “Swiggy is a law-abiding company that has always operated in full compliance of the regulatory framework and paid all applicable taxes in a timely manner. We have extended our full cooperation to the IT department in its recent survey and will continue to assist them with their queries if any. We are yet to receive any formal communication from the authorities and deny all the allegations in relation to this matter.”
Earlier this week, it was reported that cab aggregators Uber and Ola were also facing allegations of evading taxes collectively amounting to more than INR 1,000 Cr. According to the report, both companies have not been paying GST on incentives to drivers or on cancelled rides, according to the GST body. It was reported that GST dues for Uber India are INR 800 Cr, while those for Ola India are INR 300 Cr.
“The companies have not been paying GST on incentives they pay to their drivers, which add up to a significant amount. And this has been happening for the last several years. So, the amount on which they have not paid taxes is huge,” a source close to the matter told Moneycontrol.
Update – January 15: Swiggy’s statement was added.