Income tax search allegations denied by Swiggy and Flipkart's Instakart

According to reports, the Income Tax Department allegedly searched the offices of Walmart's Flipkart and the Bengaluru-based food delivery unicorn Swiggy. Both Flipkart and Swiggy have denied these allegations.

Income tax search allegations denied by Swiggy and Flipkart's Instakart

Saturday January 09, 2021,

3 min Read

According to a few media reports, the Income Tax Department conducted searches at the offices of Flipkart's unit Instakart and the Bengaluru-based foodtech startup Swiggy. According to sources who informed the news wire Reuters, the searches were conducted for alleged tax evasion by third-party vendors.

However, both Flipkart and Swiggy have denied the allegations.

An official statement by Swiggy read: “Swiggy strongly denies allegations that it has been complicit in any wrongdoings by Greenfinch (a third-party vendor), with respect to it being a fictitious entity and availing bogus input tax credit. The company further denies all the baseless and inaccurate statements in relation to this matter."

The statement added that Swiggy has been assisting the GST authorities by providing details of the transactions with the concerned vendor. The vendor is a bonafide entity having operations in multiple cities, with regular statutory filings in ROC, GST, and Income Tax.

It added that the startup has provided all the details of its transactions with the vendor, along with valid service contracts, receipts of contracted services, proof of actual order deliveries to its consumers, and payments through banking channels.

Adding to this, an official statement by Flipkart said: "This is factually incorrect and we vehemently deny any allegation. The investigation by the GST Authority is on the alleged GST default by two manpower service providers of Instakart and should not to be misconstrued as being related to any wrongdoing by us."

Flipkart's statement has added to what Swiggy stated — that as required by the GST Authority, it has participated in the investigation proceedings and submitted several documents/information in relation to the investigation. 

"We have extended full co-operation with the investigation and our employees have repeatedly appeared before the Authority. Our transactions with these service providers are based on the valid GST Registration Certificate issued to them by the department, associated PAN, ROC records of the service providers, due diligence reports, service agreements, attendance records of the manpower employed by Instakart and GST invoices which have been paid through the banking channels. Our actions are within the legal framework of the tax and legal requirements and we are committed to supporting the Authority as they complete this investigation," said Flipkart's statement.

Adding further context, Swiggy that said this issue dates back to November 2019 when concerning the non-payment of GST by the vendor, a follow-on GST survey was conducted at the Swiggy office.

It added that Swiggy fully cooperated with the authorities to substantiate the services received. During the survey, Swiggy was coerced to reverse the input tax credit citing certain irregularities by the same vendor as they were untraceable.

"This reversal of credit was made without prejudice, and by reserving the company’s rights to recover it following the due process of law. As a result of this action, Swiggy also initiated legal proceedings against the vendor, and an arbitration process is currently underway. Subsequently, an Income Tax Survey was conducted this week as a follow-on action wherein the Swiggy team has provided all documents to the authorities and proved its bonafide," added the statement.

Edited by Kanishk Singh