Breaking News:Meesho gets Rs 1,500 crore tax demand for alleged under-reporting of income– What Just Happened

Ecommerce marketplace Meesho, which went public in December, has received a tax demand of nearly Rs 1,500 crore from the income tax department for allegedly under-reporting its income for the financial year 2022-23, according to a regulatory filing with stock exchanges.

The company said it is evaluating the order and that the demand notice does not have any material adverse impact on its financials. “As per the assessment order… the income tax department has made certain additions/adjustments to the income reported by the company,” Meesho said in its filing, adding that the amount also includes interest on unpaid taxes.

Large tax disputes for ecommerce marketplaces typically arise from a few recurring issues. While Meesho’s disclosure does not specify the exact adjustment, such cases often relate to companies treating customer discounts and incentives as business expenses, thereby reducing taxable profits. Tax authorities in earlier cases have argued that some of these payments should not be fully deductible or should be treated differently for tax purposes.

Meesho said it had earlier received a similar tax notice for fiscal 2022, which it challenged in court. In its IPO prospectus, the ecommerce platform disclosed that the income tax department had issued a show-cause notice on January 25, 2025, for the assessment year 2022-23, seeking explanations for certain proposed adjustments to its tax filings. A financial year refers to the period in which income is earned (April–March), while the assessment year is the subsequent year in which that income is reviewed and taxed.

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 issues related to tax deducted at source (TDS) on certain foreign remittances. Meesho responded to the notice on February 7, 2025, submitting additional information and seeking a hearing.

However, on March 13 last year, the tax authority issued a series of orders including an assessment order and demand notice raising a tax demand of Rs 572 crore.