Zomato Slumps 2.5% After GST Dept Slams Notice 10 Times Of Its Net Profit

Zomato stocks caught up in the downward momentum on Thursday, after the GST authorities sent a show cause notice of nearly Rs 402 crore to the firm alleging the unpaid dues which were earned by levying delivery charges to the customers on behalf of delivery partners.

The stocks plunged 2.5 per cent to Rs 124.05 on the national stock exchange (NSE). 

The show-cause concerns an alleged tax liability for the period of 29 October 2019 to 31 March 2022 of Rs 401.7 crore, plus interest and penalties. The Central Goods and Services Tax Act, 2017's Section 74(1) has been charged to make the tax demand.

Zomato "strongly believes that it is not liable to pay any tax since the delivery charge is collected by the company on behalf of the delivery partners", the company said in a regulatory filing.

"In view of the contractual terms and conditions mutually agreed upon, the delivery partners have provided the delivery services to the customers and not the company. The company will be filing an appropriate response to the show cause notice (SCN)," it said.

Since the amount of tax in question, Zomato has disclosed that no order of any type has been passed against the company. They have done this out of caution. Zomato expressed that its meritocracy argument is substantial.

Zomato's reported financial results for the September quarter in comparison to the show-cause notice amount of Rs 402 crore from the GST authorities and stated that the alleged tax amount is 1000 per cent higher than its net profit of Rs 36 crore.

The stock’s year-to-date (YTD) performance has remained robust despite initial shocks after its initial public offering (IPO) in 2021. The YTD returns stood at 104.5 per cent which beat the benchmark indices Nifty and Sensex returns of 18 per cent with a massive margin.