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Published: December 28, 2023
Updated: December 28, 2023

Zomato Faces Rs 402 Crore Tax Notice - Shares Under Watch

Zomato, the online food delivery giant, is at the center of attention as it discloses receiving a significant tax notice of Rs 402 crore under Section 74(1) of the Central Goods and Services Tax Act, 2017. This development comes amid a remarkable 110% rally in Zomato's shares in 2023.

Show Cause Notice and Alleged Tax Liability:

Zomato revealed that the show cause notice demands an explanation for an alleged tax liability of Rs 401.70 crore, inclusive of interest and penalty, covering the period from October 29, 2019, to March 31, 2022. The company contests this claim, asserting it is not liable for the tax as it merely collected delivery charges on behalf of its delivery partners.

Zomato's Position and Legal Support:

1. Delivery Partners' Role :
Zomato emphasizes that, based on contractual terms, it is the delivery partners who provided services to customers, not the company itself. This stance is further reinforced by opinions from external legal and tax advisors.

2. Filing an Appropriate Response:
Zomato intends to challenge the tax notice and will be filing a comprehensive response. The company believes it has a strong case on merit, underlining that the disclosure is made voluntarily and as a precautionary measure.

Market Impact and Share Performance:

1. Shares in Focus: With Zomato shares having surged 110% in 2023, investors and the market are closely monitoring the impact of the tax notice on the company's valuation.

2. Voluntary Disclosure: Zomato clarifies that the voluntary disclosure is made due to the absence of any order passed at this stage. The company asserts its confidence in the merit of its case despite the substantial alleged tax demand.

Zomato's revelation of a substantial tax notice adds a layer of uncertainty to its otherwise impressive year in the market. As the company navigates through this tax challenge, the response it files will play a crucial role in determining the impact on its financial standing and market perception. Investors will be keenly observing how this unfolds, given Zomato's prominent position in the online food delivery sector.