The Directorate General for GST Intelligence (DGGI) has issued two show-cause notices (SCNs) to Patanjali Group companies, Patanjali Ayurved and Patanjali Foods, raising concerns over alleged GST non-payment and wrongful claiming of Input Tax Credit (ITC).
Allegations and Investigations
- DGGI sent two SCNs to Patanjali Group companies on April 19, 2024, citing non-payment of GST and wrongful ITC claims.
- One matter, involving the claiming of illegal ITC and non-payment of GST on goods amounting to Rs 2,100 crore, has been referred to Uttarakhand GST authorities for further investigation.
- Investigations by DGGI Meerut and DGGI Chandigarh zones uncovered circular trading practices, where invoices were issued without actual supply of goods, inflating turnover and revenue.
- Patanjali Ayurved allegedly engaged in circular trading amounting to Rs 2,640 crore between 2018-2022, resulting in fake ITC claims worth nearly Rs 15 crore.
- DGGI Meerut issued SCNs to Patanjali Ayurved’s directors and executives under relevant sections for tax invoice issuance without supply of goods and wrongful ITC claims.
- Patanjali Foods Ltd. faces allegations of bogus ITC claims worth Rs 27.46 crore based on fake invoices from fictitious firms, leading to penal proceedings initiated by DGGI Chandigarh.
Response from Patanjali Group
- Patanjali Group states it will address the allegations in a legal manner and has responded to both GST divisions accordingly.
- The group maintains that transactions were revenue-neutral, with no intention of tax evasion, emphasizing compliance with output tax payments.
Expert Insights
- Tax experts highlight the complexity of circular trading transactions and emphasize the need to consider legal implications and definitions of ‘supply’ and ‘movement of goods’ in assessing tax liabilities.
Conclusion
- The allegations against Patanjali Group companies underscore the importance of adherence to GST regulations and transparency in business operations.
- As investigations unfold and legal proceedings progress, the outcome will shed light on the extent of compliance and potential consequences for the entities involved.
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