Zomato Faces ₹8.6 Crore GST Penalty Notice from Gujarat's Deputy Commissioner of State Tax

Online food delivery giant Zomato has received a setback in the form of a Goods and Services Tax (GST) demand notice from the Gujarat government. This development comes amidst a recent share sale by Antfin Singapore Holding, an affiliate of Alibaba's Ant Financial Group. Let's delve deeper into these situations and their potential implications for Zomato.

GST Demand Notice: A Cause for Concern

According to a regulatory filing, Zomato received a demand notice from the Deputy Commissioner of State Tax, Gujarat, for excess availment of input tax credit (ITC) and short payment of GST during the financial year 2018-19. The total demand, including interest and penalty, amounts to ₹8.58 crore.

Zomato's Response and Appeal Plans

Zomato clarified its position in response to the show-cause notice, providing relevant documents and circulars to support its case. However, the company believes that these explanations were not fully considered by the authorities. Zomato has expressed confidence in its ability to defend the matter before appellate authorities and expects no financial impact from the case.

Antfin Singapore Holding Reduces Stake in Zomato

Adding to Zomato's recent challenges, Antfin Singapore Holding, a major Zomato investor, offloaded a 2.02% stake (over 17.6 crore shares) through open market transactions on March 6, 2024. The sale, valued at approximately ₹2,827 crore, signifies a shift in Antfin's investment strategy for Zomato.

Previous GST Show-Cause Notice and Delivery Fee Dispute

In December 2023, Zomato received another show-cause notice worth ₹402 crore for unpaid GST on delivery charges. This notice pertained to the period between October 29, 2019, and March 31, 2022, and included interest and penalty on delivery fee collections from customers. The outcome of this notice remains unclear.

Looking Ahead: Unfolding Implications for Zomato

The GST demand notice and Antfin's share sale pose potential challenges for Zomato. Here's a breakdown of the implications:

• Financial Impact: While Zomato is confident in its appeal against the GST demand notice, any adverse ruling could lead to financial strain.

• Investor Confidence: The recent developments might affect investor sentiment towards Zomato, potentially impacting its share price.

• Focus on Profitability: Zomato needs to prioritize achieving profitability to regain investor confidence and navigate these financial hurdles.

Zomato's ability to navigate these challenges will be crucial for its future growth. A successful resolution of the GST matter and a focus on sustainable business practices are essential for regaining investor confidence and ensuring long-term success.