Zomato Shares Dip Following Tax Notices on Delivery Services

Zomato Shares Dip Following Tax Notices on Delivery Services

VoM News Desk | November 23, 2023 | 07:07 PM IST | Breaking News | Follow on Google News

Zomato Shares Dip Following Tax Notices on Delivery Services

Zomato Shares Dip Following Tax Notices on Delivery Services

Zomato’s share price experienced a 2.4% decline in Thursday’s trading session. This drop came after news surfaced of the company, along with Swiggy, receiving tax notices from the Directorate General of GST Intelligence (DGGI) for unpaid taxes totaling approximately ₹750 crore.

Details of the Tax Demand

• Tax Demands: Zomato faces a tax demand of over ₹400 crore, while Swiggy has been issued a demand of approximately ₹350 crore.
• Service Classification: The DGGI considers delivery as a service, which led to the decision to send these tax notices. The companies are found liable to pay the Goods and Services Tax (GST) on delivery services for the period between July 2017 and March 2023.

Impact on Zomato’s Stock

• Opening Price: Zomato’s shares opened at ₹113.15 on the BSE.
• Technical Analysis: Equity Technical and Derivative Analyst Rajesh Bhosale from Angel One noted that Zomato’s stock had been declining over the week, with a loss of more than 7%. He identifies ₹108 as the next support level and ₹120 as a potential resistance point.
• Consolidation Predicted: Ruchit Jain, Lead Research Analyst at 5paisa, anticipates near-term consolidation, with supports at around ₹112 and ₹102.

Financial Performance and Analyst Outlook

• Quarterly Results: For the quarter ended September, Zomato posted a net profit of ₹36 crore, a significant improvement from a net loss of ₹251 crore in the same period last year. Its revenue surged by 72 percent to ₹2,848 crore.
• Brokerage Rating: Jefferies maintained a ‘Buy’ rating on Zomato with a target price of ₹165, valuing the quick commerce and food delivery segments based on future sales and Ebitda. The main risks highlighted include increasing competition, market growth pace, and regulatory changes.

This development underscores the regulatory challenges faced by digital platforms like Zomato and Swiggy, particularly in the evolving domain of GST and service classification.

VoM News Desk

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