IPO-Bound Urban Company Faces INR 51 Cr GST Demands

IPO-bound consumer services unicorn Urban Company is facing demand notices from GST departments in various states worth INR 51.25 Cr

As per the company’s draft red herring prospectus filed with markets regulator SEBI yesterday, it has received showcause notices from the GST departments of Haryana, Maharashtra and Tamil Nadu. 

Here are the GST demand notices against the company which are under dispute:

– Urban Company received demand orders of INR 20.4 Cr from the Haryana GST department for non-payment of GST linked to an expanded definition of housekeeping services and mismatches in GSTR2A (Electronic Input Tax Credit Ledger) and actual input tax credit availed by it for the year 2018-19. 

– The company received a demand notice of INR 14.6 Cr in Maharashtra for the full value of services supplied under Section 9(5) and non-payment of GST for commission income earned in Maharashtra but deposited in Haryana. The department has also levied a 100% penalty on the above.

– The company was slapped with a demand order of INR 15.97 Cr (including GST, penalties and interest) in Tamil Nadu as the assessing officer considered the full value of services supplied.

All of these tax notices have been disputed by the company.

Notably, Section 9(5) of the CGST Act applies to ecommerce operators, making them liable to pay GST for certain notified services like housekeeping services, passenger transport services and others. 

In 2018, Urban Company faced significant challenges due to the imposition of 18% GST on housekeeping services booked online, which then constituted about 30% of its business. 

The company, along with peers like Housejoy, actively lobbied the government for relief, requesting either the removal of housekeeping services from the specified services under Section 9(5) or a reduced GST rate of 5% for service professionals with turnover under INR 20 Lakh.

Apart from the aforementioned GST demands, Urban Company also has contingent liabilities worth INR 4.38 Cr for matters under dispute from consumers related to services provided through service providers and lessors related to leased premises, the DRHP showed. 

Urban Company Joins The IPO Queue

As per its DRHP, Urban Company’s IPO will comprise a fresh issue of up to INR 429 Cr and offer for sale of up to INR 1,471 Cr. Accel, Elevation Capital, Tiger Global, among others, will offload shares via the offer for sale in the IPO. 

The proceeds from the fresh issue will be used for new technology development and cloud infrastructure, lease payments for its offices and marketing activities. 

On the financial front, Urban Company posted a net profit of INR 242.6 Cr in the first nine months of FY25 as against a loss of INR 57.8 Cr in the year-ago period. Its revenue jumped 41% to INR 846 Cr during the period under review from INR 600.9 Cr in 9M FY24.

With this, Urban Company has become the latest new-age tech startup to join the IPO parade. More than 20 new-age tech startups are expected to go public this year, with Ather Energy on track to become the first startup to hit the bourses. Meanwhile, BlueStone and Aye Finance have received SEBI’s nod to proceed with their respective IPOs.

Others like PhysicsWallah and boAt have filed their DRHPs with SEBI in recent times. Besides, startups like Zepto, Groww, PhonePe and Pine Labs have shifted their domiciles to India as they prepare for their respective IPOs, while Razorpay and Meesho are in the process of doing so.