Zomato Faces Fresh Tax Demand of Rs 11.82 Crore, Expects No Financial Impact

Zomato, the leading Indian food delivery company, has been hit with another tax demand. This time, the company faces a demand and penalty order totalling Rs 11.82 crore related to Goods and Services Tax (GST) on export services.

GST on Export Services: Zomato to Appeal

The demand order pertains to GST levied on export services provided by Zomato to its overseas subsidiaries between July 2017 and March 2021. Zomato maintains that the tax assessment is incorrect and plans to file an appeal against the order. "We believe that we have a strong case on merits and the company will be filing an appeal before the appropriate authority," the company stated in a regulatory filing.

Zomato's Shrinking International Presence

While Zomato initially viewed its international ventures as a potential growth driver, these operations have contributed minimally to the company's overall earnings. Consequently, Zomato has been strategically scaling back its international presence. As reported earlier by Economic Times (ET) Zomato has shut down most of its international subsidiaries, including those in Singapore, the UK, the US, and South Africa. The company has also initiated the liquidation process for its businesses in Vietnam and Poland.

No Impact on Overall Operations Expected

Zomato emphasizes that the liquidation of its international subsidiaries and the recent tax demand will not affect its core business operations. The company clarifies that it is not currently engaged in any active business activities in the foreign markets where these subsidiaries were located.

Previous Tax Issues

This is not the first time Zomato has faced tax-related challenges. Earlier in April, the company received a hefty service tax demand and penalty order exceeding Rs 184 crore for non-payment of service tax between October 2014 and June 2017. Additionally, in April 1st, the Karnataka commercial tax authorities issued a separate tax demand notice of Rs 23 crore for allegedly availing excess input tax credit under GST rules.

Zomato's recent tax troubles highlight the complexities of navigating the Indian tax landscape for businesses operating internationally. The company's decision to appeal the latest GST demand suggests its confidence in contesting the levied tax.