Zomato shares were trading more than 4 per cent down on Thursday morning after it received Rs 400 crore show-cause notice from the goods and services tax (GST) authorities over unpaid dues collected as "delivery charges".
The Directorate General of GST Intelligence (DGGI) last month issued a demand notice to Zomato and its rival Swiggy, asking them to pay pending dues of over Rs 400 crore and Rs 350 crore, respectively.
The show-cause notice to Zomato is for the period between October 29, 2019, and March 31, 2022, according to media reports.
The food delivery platform said that it "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".
In a regulatory filing, Zomato said that 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)," Zomato added.
"At this stage, no order of any kind has been passed and as mentioned above, the company believes that it has a strong case on merit," said the company.
Last month, Zomato and Swiggy received GST notices on delivery charges.
As per Zomato and Swiggy, 'delivery charge' is nothing but the cost borne by the delivery partners who go to deliver food from door to door.
Swiggy recently increased the platform fee from Rs 2 to Rs 3 for food orders.
A Swiggy spokesperson had told IANS that "there has been no significant change on platform fee, which is applied by most service players and is a common practice across industries".
Zomato earlier increased its platform fee to Rs 3 per order from an initial Rs 2.