Zomato, India's leading food delivery and quick commerce platform, has been ordered to pay a staggering $94.5 million in allegedly unpaid gross goods and services tax (GST) by the Indian tax authority. The tax demand, which also includes penalties and interest, relates to the period between October 29, 2019, and March 31, 2022.

The tax liability, amounting to 401.7 crore, specifically pertains to non-payment of GST on delivery charges, a matter that may have broader implications for India's rapidly growing food delivery sector. This development comes as a significant financial blow to the Gurugram-headquartered company, exceeding half of its profits for the fiscal year ending March 2024.

Zomato has responded to the tax order, stating in a stock exchange filing that it "has a strong case on merits which is backed by opinions from external legal and tax advisors" and plans to appeal the order before the appropriate authority. The company's decision to contest the tax demand suggests that it is confident in its position and willing to take the matter to court if necessary.

The food delivery giant's tax woes may have far-reaching consequences for the industry as a whole. If the tax authority's order is upheld, it could set a precedent for other food delivery platforms operating in India, potentially leading to a significant increase in their tax liabilities. This, in turn, could impact the prices of food delivery services, ultimately affecting consumers.

Zomato's valuation, which stands at around $32 billion, has likely taken a hit following the tax order. The company's ability to navigate this challenge will be closely watched by investors and industry observers alike. As the food delivery market in India continues to grow, the outcome of this tax dispute will have significant implications for the sector's future.

It remains to be seen how Zomato's appeal will fare, but one thing is certain – the company's tax troubles are far from over. As the situation unfolds, it will be essential to monitor the developments and their potential impact on India's thriving food delivery ecosystem.