E-commerce marketplace Meesho has received a tax demand of nearly Rs. 1,500 crore (US $ 162 million) from the Income Tax Department for the financial year 2022–23, according to a regulatory filing submitted to stock exchanges.
The demand relates to alleged under-reporting of income for the period and includes interest on unpaid taxes. In its filing, the company stated that the tax authority had made certain additions and adjustments to the income reported in its tax returns.
Meesho said it was currently evaluating the assessment order and maintained that the demand notice would not have any material adverse impact on its financial position.
Large tax disputes involving e-commerce marketplaces often arise from recurring issues linked to the treatment of customer discounts and promotional incentives. Companies frequently classify such expenses as business costs, thereby reducing taxable profits. However, tax authorities in previous cases have argued that some of these payments should either not be fully deductible or should be treated differently for tax purposes.
While the company’s disclosure did not specify the exact adjustments in this instance, similar disputes in the sector have typically centred on such accounting treatments.
Meesho also noted that it had previously received a similar tax notice relating to the financial year 2021–22, which it challenged in court.
In its initial public offering prospectus, the company disclosed that the Income Tax Department had issued a show-cause notice on 25th January 2025 for the assessment year 2022–23, seeking clarification on proposed changes to its tax filings.
A financial year refers to the period during which income is earned, typically from April to March, while the assessment year is the subsequent year in which that income is examined and taxed by authorities.
According to the prospectus, the proposed adjustments included the possible disallowance of certain advertisement and communication expenses, the tax treatment of mark-to-market gains on forward contracts, and questions related to tax deducted at source (TDS) on certain foreign remittances.
The company responded to the notice on 7th February 2025 by submitting additional information and requesting a hearing. However, on 13th March last year, the tax authority issued a series of orders, including an assessment order and a demand notice that initially raised a tax demand of Rs. 572 crore (US $ 61.97 million).
Meesho subsequently challenged the orders before the Karnataka High Court on 9th April, arguing that the assessment was flawed and violated the principles of natural justice.
On 17th April, the High Court granted an interim stay on the tax demand. The matter remains pending before the court.
In its latest filing, the company stated that it did not concur with the observations and adjustments made in the assessment order. It added that it believed it had sufficient legal and factual grounds to contest the demand and was taking appropriate steps to safeguard its interests.
Financially, Meesho reported a sharp increase in net losses during the October–December quarter, which rose thirteenfold to Rs. 491 crore (US $ 53.19 million). At the same time, operating revenue for the period increased by 31% to Rs. 3,517 crore (US $ 381 million).
