Zomato, Swiggy get notice for Rs 750 crore in unpaid taxes from DGGI

DGGI believes that since delivery is a service, Zomato & Swiggy are liable to pay GST on service

The Directorate General of GST Intelligence (DGGI) has sent a goods and services tax (GST) demand notice worth about Rs 750 crore to Zomato and Swiggy, according to a report by CNBC-TV18. DGGI believes that since delivery is a service, Zomato and Swiggy are liable to pay GST on service.

According to the report, the estimated GST demand from Zomato is over Rs 400 crore, while the demand is Rs 350 crore from Swiggy. The estimated demand has been calculated from July 2017 to March 2023.

The Central government, in January 2022, added 'restaurant services' and cloud kitchens under the purview of Section 9(5) of the CGST Act, 2017, which led to the likes of Swiggy and Zomato paying 5 per cent GST on 'restaurant services' they offer.

A senior executive was quoted as saying that the delivery fee does not come under the purview of revenue as it goes directly to the rider. This is an interpretation of guidelines that the company's tax consultants have approved.

He added that the company holds that riders are not employees but contractors.

In October, Swiggy hiked the platform fee on food delivery orders to Rs 3 from Rs 2. The rise in platform fees was implemented on October 4. The platform fee is charged along with the delivery charge, which is waived for customers who subscribe to Swiggy's loyalty programme, Swiggy One.

On November 22, the Zomato stock ended more than 1 per cent lower at Rs 115.30 apiece.