Zomato hit with Rs 803 crore tax notice demand amid AI integration plans

Zomato has been hit with a tax demand notice of Rs 803 crore by the Goods and Services Tax (GST) department. The notice, issued by the Joint Commissioner of CGST and Central Excise in Thane, includes GST demand and interest and penalty. The tax demand notice is primarily for not paying GST on delivery charges. The total amount of Rs 803 crore includes GST demand of Rs 401.7 crore and an equal amount in interest and penalty.

This is not the first time Zomato has faced such a situation. Earlier this year, in January and June, the company received GST demand notices of Rs 4.2 crore and Rs 9.45 crore, respectively. In 2023, Zomato was served a GST demand notice of Rs 400 crore on delivery charges. Delivery charges are a common feature in the business models of companies like Zomato, Swiggy, and other food and quick commerce companies. These companies maintain that gig workers function as delivery partners and are paid on an order basis. The delivery charge collected from the users is given directly to the gig worker.

However, under GST laws, the delivery charge is considered a service, as the platforms are collecting it. This has led to the possibility of levying an 18 per cent GST on delivery. Despite the tax demand, Zomato remains confident about its position. The company has stated, We believe that we have a strong case on merits, supported by the opinion of our external legal and tax advisors. The company will file an appeal against the order before the appropriate authority.

In the midst of this tax controversy, Zomato has been making strides in other areas. The company recently raised over $1 billion through qualified institutions placement (QIP) of equity shares. In the second quarter of the financial year 2025, Zomato’s total income grew 68.5 per cent year-on-year to Rs 4,799 crore, from Rs 2,848 crore in the same period of the previous financial year. The company’s net profit increased 4.8 times to Rs 176 crore in the September quarter.

Zomato is also preparing to integrate generative artificial intelligence (AI) into its range of services. The company has initiated trials with AI technology to enhance the overall customer experience. Zomato, along with its quick commerce platform Blinkit, plans to recruit engineers specializing in machine learning, data science, and natural language processing to build AI-driven products. The company has also appointed a dedicated head of AI product development to lead these endeavors. The aim is to improve the overall customer experience across both Zomato and Blinkit platforms.

The tax demand notice has put a spotlight on the regulatory scrutiny faced by food delivery platforms regarding tax compliance. Analysts are closely watching the situation to evaluate its potential long-term impact on the company’s financial stability. Resolving this GST issue will be critical for maintaining investor confidence and ensuring smooth operations going forward.