Urban Company Served INR 56 Cr GST Demand-Cum-Penalty Notice

Maharashtra goods and services tax (GST) authorities have sent Urban Company a tax demand and penalty notice amounting to INR 56.4 Cr. The company stated in a filing with the exchanges that the total sum consists of INR 51.3 Cr in primary tax and INR 5.13 Cr in penalty. The notification for the April 2021–March 2025 period was confirmed by Thane's office, the joint commissioner of central GST and central excise.

The complaint concerns the company's alleged failure to pay GST on payments to service professionals. According to Urban Company, it has been applying a 5% GST tax on payments made to experts who exclusively offer services like cleaning, carpentry, and plumbing. These offerings were essentially regarded as housekeeping services by the listed businesses. However, Thane GST authorities believed that Section 9(5) of the CGST Act 2017 also applied to services like painting and appliance repair. Payouts for these services would therefore also need to be taxed appropriately.

Urban Company to Challenge the Order

Urban Company, a major provider of consumer services, now intends to challenge the ruling in front of the "appropriate" body. In light of this, the tax department ordered Urban Company to pay the tax on all of these services during the reviewed period. Notably, e-commerce operators are subject to Section 9(5) of the Act, which requires them to pay GST for specific designated services, such as housekeeping and passenger transportation.

The corporation recently informed the exchange that it would be appealing the order to the relevant authorities. Based on the advice of our outside legal and tax counsel, we think we have a compelling case. Urban Company asserted that the tax demand notice would not affect the company's operations, finances, or any other aspect of its business.

GST Notices Regular Tickets to the Urban Company

The listed startup has had previous run-ins with GST officials. The GST authorities of Tamil Nadu, Maharashtra, and Haryana have already sent the corporation at least three further demand notices totalling INR 51.3 Cr. A demand notice for INR 20.4 has been filed by Haryana GST officials against the company for failing to pay taxes related to an extended definition of housekeeping services and for discrepancies between the actual input tax credit obtained for the year 2018–19 and GSTR-2A.

A demand notice for INR 14.6 Cr has also been issued by Maharashtra tax officials to the startup for failing to pay GST on commission income collected in Maharashtra but deposited in Haryana. In a similar vein, after taking into account the entire value of the services rendered, Tamil Nadu GST officials issued a demand notice for INR 15.97 Cr.

The listed company has contested each of these tax notices. When Urban Company was first established in 2014, it functioned as a full-stack online marketplace that linked customers and service providers. The business also entered the consumer electronics market in 2023 with the introduction of its "Native" line of goods, which included smart doors and water purifiers.