Tax concealment in case of Walmart-owned Flipkart’s unit is about Rs 650 crore while the remaining estimation is related to Swiggy.
Over Rs 950-crore tax evasion by food delivery start-up Swiggy and Instakart (a group firm of Flipkart) has been detected following recent survey operations in Bengaluru.
According to the initial findings of the Income Tax Department, third party vendors were also involved in the concealment of taxable income.
"The survey operations on the companies resulted in impounding of incriminating documents evidencing tax evasion issues including non-deduction from tax deducted at source (TDS) on commission income and cancellation charges by Swiggy and their restaurants along with shifting of loss from Flipkart to Instakart,” said a tax official privy to the preliminary findings.
Tax concealment in case of Walmart-owned Flipkart’s unit is about Rs 650 crore while the remaining estimation is related to Swiggy, he added.
The survey was in connection with alleged wrongful input tax credit under the Goods and Services Tax.
But, various other tax-related irregularities surfaced during the operation.
The final report on the matter will be sent to the direct tax board by end of the month after scrutiny of all the documents it had collected during the survey, the official said.
A Flipkart spokesperson said the company had not received any such information from the tax authority.
"During the survey, we fully cooperated and provided all documents to the complete satisfaction of the tax officials in support of our compliance and record management.
"Our senior officials have appeared before tax authorities from time to time and provided all information and clarifications as sought.
"We will continue to work with the tax authority as and when we hear from them," the spokesperson said.
The Swiggy spokesperson said it was yet to receive any formal communication from the I-T department and denied the allegations.
“Swiggy is a law-abiding company that has always operated in full compliance of the regulatory framework and paid all applicable taxes in a timely manner.
"We have extended our full cooperation to the I-T dept in its recent survey and will continue to assist them with their queries if any."
The department is also probing the issue of payment to sub-contractors.
A substantial amount of tax evasion by sub-contractors has also been found, the tax official quoted above said.
These sub-contractors were non-filers of income tax for more than four years even though TDS has been made on their receipts in crores.
"Although the companies have no direct link with sub-contractors’s tax profile, it raises suspicion on whether they were genuine or not.
"The verification of the contractor claims are underway," he pointed out.
TDS is deductible (by the end supplier) on amount retained by the e-commerce portal, which is nothing but commission paid by the supplier to it (the portal) and therefore covered under 194H of the Act.
Similarly, TDS is required to be deducted u/s 194C on payment made to the delivery boys/agency.
Explaining the TDS implications, the tax department said that in the case of Flipkart, post the acquisitions by Walmart in 2018, it had increasingly turned to hybrid or omni-channel sales model.
So, the TDS issues involved in the Flipkart model are many, including on commission from seller/supplier under Section 194H of I-T Act; shipping fees/delivery charges; logistics and storage charges etc.
"We take pride in the fact that we are fully compliant with all applicable tax laws and regulations in the country.
"We’re proud that as a homegrown marketplace, we enable lakhs of sellers, MSMEs, kiranas and artisans to connect with consumers across the country, helping them grow, accelerate their businesses and making them prosperous and contribute to thousands of crores of tax revenue through our operations every year," the Flipkart spokesperson said.
In case of food delivery platforms like Swiggy, Zomato, Uber Eats etc., the e-platform charges about 20 per cent commission, which is deducted from the payment received from customers.
Also, the amount payable to delivery boys is deducted and only the balance is paid to the restaurant.