GST Cloud Over Urban Company: Inside the INR 56 Cr Tax Demand and What It Means for the Services Unicorn

Urban Company has built its reputation on convenience—bringing plumbers, electricians, cleaners, painters, and beauticians to millions of Indian homes with a few taps on a smartphone. But as the hyperlocal services unicorn continues to scale its ambitions, it now finds itself navigating a far less convenient challenge: a sizeable tax demand from India’s GST authorities.

The company has received a GST demand and penalty notice totalling INR 56.4 crore from the Maharashtra tax department, adding another chapter to its growing list of regulatory disputes across multiple states.

What the GST Notice Is About

According to disclosures made by Urban Company, the notice was issued by the Office of the Joint Commissioner of Central GST and Central Excise, Thane, and covers the period between April 2021 and March 2025.

The total demand comprises:

• INR 51.3 crore as principal tax

• INR 5.13 crore as penalty

At the heart of the issue is the GST treatment of payouts made to service professionals working on the Urban Company platform.

Urban Company has maintained that it levied 5% GST on payments made to professionals offering services such as plumbing, carpentry, and cleaning, categorising these as housekeeping services. Under this framework, the company considered its tax compliance to be in line with existing GST norms.

However, Maharashtra GST officials have taken a different view.

The Section 9(5) Dispute Explained

Tax authorities argue that services like appliance repair and painting should also fall under Section 9(5) of the CGST Act, 2017—a provision that places GST liability directly on ecommerce operators for certain notified services.

Section 9(5) applies to services such as:

• Housekeeping services

• Passenger transport services

• Other notified categories

By this interpretation, Urban Company would be required to pay GST on all such services, rather than limiting the tax to specific categories.

As a result, authorities have directed the company to pay GST on payouts for a wider range of services during the period under review—leading to the current INR 56.4 crore demand.

Company Response: “No Impact on Operations”

Urban Company has firmly stated that it plans to challenge the order.

In its filing, the company said it will appeal before the appropriate authority and expressed confidence in its legal position. According to the disclosure, Urban Company believes it has a strong case on merits, backed by opinions from external legal and tax advisors.

Importantly, the company has also sought to reassure stakeholders that the demand notice will have no impact on its financial position, operations, or business continuity.

Not the First GST Run-In

This latest notice is not an isolated case.

Urban Company is already contesting at least three other GST demand notices, collectively amounting to INR 51.3 crore, issued by tax departments in Haryana, Maharashtra, and Tamil Nadu.

Here’s a snapshot of those disputes:

• Haryana:
  A demand of INR 20.4 crore, linked to an expanded definition of housekeeping services and discrepancies between GSTR-2A filings and actual input tax credit claimed for FY2018–19.

• Maharashtra:
  A separate INR 14.6 crore demand related to GST on commission income earned in Maharashtra but deposited in Haryana.

• Tamil Nadu:
  A demand of INR 15.97 crore, where authorities considered the full value of services supplied while assessing tax liability.

Urban Company has disputed all these notices, underscoring the broader regulatory complexity faced by platform-based service marketplaces operating across state lines.

From Marketplace to Multi-Category Brand

Founded in 2014, Urban Company began as a full-stack online marketplace connecting skilled professionals with customers. Over the years, it has steadily expanded beyond services.

In 2023, the company entered the consumer electronics segment with the launch of its ‘Native’ product line, which includes water purifiers and smart doors. More recently, it rolled out ‘Insta Help’, a rapid-response service promising a maid booking within 15 minutes.

These expansions reflect Urban Company’s push to deepen customer engagement and unlock new revenue streams—at a time when regulatory scrutiny is also intensifying.

Financial Snapshot and Market Reaction

On the financial front, the company reported a net loss of INR 59.3 crore in Q2 FY26, a sharp increase from INR 1.8 crore in Q2 FY25. Despite this, operational momentum remains strong, with operating revenue rising 37% year-on-year and 4% quarter-on-quarter to INR 380 crore during the quarter.

The market, however, reacted cautiously to the latest developments. Urban Company shares closed 3.14% lower at INR 126.6 on the BSE following the disclosure.

The Bigger Picture

Urban Company’s ongoing tussles with GST authorities highlight a broader challenge facing India’s platform economy: how legacy tax frameworks apply to new-age digital marketplaces. As services blur traditional boundaries and platforms play a central role in service delivery, interpretations of liability continue to evolve—often through regulatory action and legal appeals.

For now, Urban Company remains confident in its position. But as appeals progress and cases unfold across states, the outcome could carry implications not just for the company, but for India’s entire hyperlocal services ecosystem.

For a startup built on simplifying life for consumers, navigating India’s complex tax landscape may prove to be one of its toughest tests yet.