Fresh Trouble Brews For Zomato, Gets INR 92 Cr Tax Demand Notice

Trouble continues to mount for Zomato as the foodtech major has now received an order to pay service tax of INR 92 Cr, a day after it had received a GST notice of INR 23.26 Cr for FY19 from Karnataka tax authorities.

Zomato has received an order to pay service tax of INR 92,09,90,306, along with applicable interest (not quantified) and a penalty of INR 92,09,90,306, the company said in regulatory filings.

The order has been passed according to Regulation 30 of the Listing Regulations by the Commissioner, Adjudication, Central Tax, Delhi, for the period October 2014 to June 2017.

The amount has been determined based on certain sales made by the foreign subsidiaries and branches of the company to its customers located outside India.

“Company (Zomato) in its response to the show cause notice had clarified the allegations along with supporting documents and judicial precedents, which appears to not have been appreciated by the authorities while passing the order,” the notice said.

As mentioned, Zomato believes that it has a strong case to defend the matter before the relevant appellate authority and does not expect any financial impact on the company.

Zomato has continuously been bombarded with tax-related notices from the government in the last few months. The company has earlier received the following notices as well:

• GST penalty notice of INR 8,57,77,696 from Gujarat’s Deputy Commissioner of State Tax in March 2024
• INR 401.7 Cr show cause notice from the Directorate General of GST Intelligence, Pune Zonal Unit, over unpaid tax on delivery charges collected from the customers, for the period between October 29, 2019 and March 31, 2022 in December 2023

Amid all these tax fiasco, Zomato also approved a total grant of 15,16,229 stock options under Foodie Bay Employee Stock Option Plan 2014 (“ESOP 2014”), Zomato Employee Stock Option Plan 2021 (“ESOP 2021”) to the eligible employees.

According to the regulatory filing, 30,30,203 equity shares of face value of ₹1 each are covered by stock options granted including requisite adjustment pursuant to corporate actions as provided under the ESOP schemes.

Zomato reported its second consecutive profitable quarter, with profit after tax surging to INR 36 Cr during the September quarter of the financial year 2023-24 (FY24). This was an 18X jump from PAT of INR 2 Cr in the preceding quarter.