A few days ago, reports emerged about Ola and Uber coming under the scanner of Directorate General of Goods and Services Tax Intelligence aka DGGI for tax evasion. Now, Swiggy and Flipkart are suffering to the same fate as well.
The latest Business Standard report revealed that the Income Tax (I.T.) Department has discovered a total of Rs 950 crores tax evasion by the Bengaluru based food delivery startup Swiggy and Instakart (a group unit of Flipkart).
According to the report, the initial findings of the IT Department suggests several third-party vendors were also connected and involved in hiding the taxable income.
An I.T. official, in a statement about the same, said that the survey operations on the two companies led them to impound documents of incriminating nature which serve as evidence of tax evasion issues including non-deduction from tax deducted at source aka TDS on commission income and cancellation charges by Swiggy and their restaurants along with shifting losses from Flipkart to Instakart.
The report stated that Flipkart-owned Instakart has been alleged to be involved in tax concealment of Rs 650 crores while the remaining Rs 300 crores were attributed to Swiggy.
The probe first started on January 7th when the I.T department decided to begin conducting surveys at the Bengaluru-based offices of Swiggy and the logistic arm of Flipkart – Instakart. According to the media report, the survey initially began in connection to alleged wrongful input tax credit aka ITC under the Goods and Services (GST) system.
When asked if they received any formal communication from tax authorieis, both Flipkart and Swiggy denied it.
A spokesperson from Swiggy said that they are a law-abiding company and therefore have always operated in full compliance of the regulatory framework put forth by the Indian Government and paid all applicable taxes on time.
The Swiggy spokesperson also mentioned that the company has extendeed their full support and cooperation to the Income Tax department in their recent survey and hope to continue assisting them with their further queries as well.
A spokesperson from Flipkart also said that they have coordinate to their best of abilities with the IT department’s survey by providing access to all documents to their complete satisfaction of the tax officials.
Apart from this, the Flipkart spokesperson also mentioned that their senior officials have appeared before the tax authorities several times in order to provided them all the information and clarifications they needed.
Lastly, the report mentioned that the Income Tax department will send a final report on the findings to the direct tax board at the end of this month.
There seems to be an impending trouble brewing for the entire Indian startup ecosystem as four probes in the very first month of the new year can’t simply be a coincidence. It could well mean that tax authorities are now gunning after the Indian tech-enabled businesses which have long been operating with little to no oversight by the GOI as a whole. We will keep you updated on all future developments. Until then, stay tuned.