On December 28, Zomato Ltd, the popular online food delivery platform, revealed that it received a show cause notice (SCN) from the Goods and Services Tax (GST) office. The notice cites a purported tax liability of ₹401.7 crore, along with interest and penalty, pertaining to the collection of delivery fees from customers spanning from October 29, 2019, to March 31, 2022.
Details of the SCN
Zomato disclosed in an exchange filing that the show cause notice, received under Section 74(1) of the Central Goods and Services Tax Act, 2017, was issued by the Directorate General of GST Intelligence, Pune Zonal Unit. The company is required to present a case explaining why the alleged tax liability, amounting to ₹401,70,14,706, along with interest and penalty, should not be demanded. The notice is linked to the delivery charges collected by Zomato from customers on behalf of delivery partners during the specified period.
Market Response
Despite the tax-related scrutiny, Zomato's stocks closed positively on December 27, gaining 1.64% at ₹127.05 on BSE and 1.48% at ₹126.85 on NSE. The company clarified that the alleged amount in the SCN is derived from the delivery charges it collected.
Zomato Live Entertainment Expansion
In a parallel development, Zomato Live Entertainment, the events vertical of Zomato, is gearing up for expansion. The company plans to venture into new cities and create fresh intellectual properties (IPs). This strategic move aligns with Zomato's recent introduction of a dedicated tab on its app, facilitating users in discovering and engaging with anticipated events across various cities.
Zomato Live's Growth Trajectory
Zeenah Vilcassim, CEO of Zomato Live, shared insights into the company's growth strategy, aiming for a substantial double-digit contribution to Zomato's topline within three years. Currently contributing a single-digit percentage to Zomato's overall revenue, Zomato Live aims for significant growth, emphasizing the business's scale and size.
Conclusion
While Zomato grapples with the GST notice, its simultaneous foray into the live entertainment sector reflects the company's commitment to diversifying and enhancing its offerings. As Zomato addresses the tax-related challenges, its expansion into new cities and the live entertainment domain underscores its strategic vision for holistic growth in the evolving landscape of food and entertainment services.
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