Foodtech major Swiggy has received a tax demand notice from the Income Tax (I-T) Department to pay an additional INR 158.25 Cr.
The company is alleged to have wrongly availed deductions for “cancellation charges paid to merchants”, Swiggy said in an exchange filing.
“Following alleged Contraventions: 1. Cancellation charges paid to merchants is disallowed under Section 37 of the Income-tax Act 1961… 2. Interest income on income tax refund has not been offered to tax,” the filing read.
Issued by the Central Circle of the I-T department’s Bangalore office, the additional demand notice pertains to the period between April 2021 and March 2022.
Meanwhile, Swiggy said it is taking necessary steps to protect its interest. “The company believes that it has strong arguments against the order and is taking necessary steps to protect its interest through review/appeal,” it added.
The foodtech major also believes that the demand notice will have no major adverse impact on its “financials and operations”.
This is not the first time that the company has received tax notices. Barely a week ago, Swiggy received an income tax demand notice of INR 99 Lakh from the office of Income Tax department, TDS Circle, Bengaluru for the period between April 2017 and March 2018.
In 2023, the GST department also slapped a demand notice of INR 326.7 Cr against the Sriharsha Majety-led company pertaining to the period between July 2020 and March 2022. The company has appealed against the notice.
Swiggy’s rival Zomato, too, has been caught in a flurry of tax notices. In December last year, the Deepinder Goyal-led company received a GST demand notice of INR 401.70 Cr, along with an interest of the same amount as penalty.
Swiggy’s Many Troubles
The latest blow from the tax authorities comes as Swiggy has been trying to douse fires on multiple fronts.
Intense competition in the quick commerce segment has resulted in high cash burn for the company and hit its bottom line. Swiggy’s net loss zoomed 39% to INR 799 Cr in Q3 FY25 from INR 574.4 Cr in the year-ago period. Operating revenue zoomed 31% to INR 3,993.1 Cr during the quarter under review from INR 3,048.6 Cr in Q3 FY24.
On the back of rising losses and intensifying competition, the company’s shares have been on a downward spiral. The stock has declined more than 38% on a year-to-date (YTD) basis.
Last week, BofA Securities downgraded both Swiggy and Zomato, citing lower growth in their food delivery segment and high losses in quick commerce. The brokerage firm trimmed Swiggy’s rating to ‘Underperform’ from ‘Buy’ earlier, and reduced the price target to INR 325 per share from INR 420.
Shares of Swiggy ended yesterday’s trading session 0.5% higher at INR 331.55 on the BSE.
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