Goods and Services TaxNews Zomato and Swiggy Face Rs 750 Crore GST Demand Madhura Shah-Gugale | GST
Introduction: The food delivery industry’s titans Zomato and Swiggy are currently battling GST demand notifications totaling an incredible Rs 750 crore, according to a study from the Directorate General of Goods and Services Tax Intelligence (DGGI). The essence of the issue is the nature of food delivery services and how GST affects them, which raises concerns about the dynamics of taxation in this quickly developing sector.
According to the DGGI, Zomato and Swiggy are required by law to pay GST since food delivery is considered a service. This position calls into question the industry’s conventional taxation framework and forces a review of the taxes of online meal delivery services.
There are substantial financial ramifications from the notifications filed to Zomato and Swiggy, which total Rs 400 crore and Rs 350 crore, respectively. This could have an impact on these industry leaders’ performance and valuation, as well as change their financial environment.
After the announcement, Zomato’s shares fell 1.07%, ending at Rs 15.25 a share. Investors and the broader market are intently observing the events as they occur in order to assess the long-term effects on the market status and valuation of these massive food delivery companies.
Sources to CNBC-TV18: DGGI issues GST demand notice to Zomato & Swiggy
— CNBC-TV18 (@CNBCTV18Live) November 22, 2023
DGGI View: Delivery is a service so Zomato & Swiggy liable to pay GST on service
Industry view: Since, each gig worker is below Rs 20lakh threshold, exempt from #GST
No comments from Zomato or Swiggy so far pic.twitter.com/OWHavKKczn
The definition of “delivery charges” lies at the core of the issue. GST regulators hold a different stance from Zomato and Swiggy, who contend that these fees represent a pass-through expense to delivery partners. This difference in viewpoints deepens the already difficult discussion.
Regulatory Evolution: There have been significant changes to the regulatory environment pertaining to online meal delivery systems. Zomato and Swiggy were instructed to start collecting and depositing taxes on orders at a rate of 5% in 2022. This was a change from the former rule that tax collection was limited to restaurants with a GST registration.
Also read: Clarification on how to determine the place of supply under the GST in different scenarios
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