Zomato is making a lot of noise today but not exactly ‘good noise’. The stock opened 1.5% lower at Rs.124.90 and slipped down further to an intraday low at Rs.123.20, down more than 3%

The reason for this disenchantment today is its disclosure that it has received a show cause notice (‘SCN’) yesterday on GST from the Directorate General of GST Intelligence, Pune Zonal Unit.

The SCN requires the company to show cause as to why an alleged tax liability of Rs.401 crore along with interest and penalty for the period from 29 October 2019 to 31 March 2022 should not be demanded from the company.

The amount alleged in the SCN is based on the amounts collected by the company as delivery charges from the customers on behalf of the delivery partners during the referred period.

The company 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. Further, 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. This is also supported by opinions from its external legal and tax advisors.

The company will be filing an appropriate response to the SCN.