Piramal Enterprises Ltd (PEL) has received a tax demand notice from the Maharashtra Goods and Services Tax (GST) department for Rs. 1,502 crore, allegedly for short payment and non-payment of tax, interest, and penalties on the sale of its pharma business to Piramal Pharma Limited (PPL). The sale was valued at Rs. 4,487 crore. The GST department considers the transfer of subsidiary companies as a taxable event, which is subject to 18% GST on the full value of the sale, including goodwill. Piramal Enterprises believes the demand is unreasonable and is seeking to challenge the order.
The company’s flagship business is in non-banking finance, retail, and wholesale lending, alternative funds, and life insurance. The tax demand is significant, amounting to 15% of the company’s revenue, but PEL believes it has adequate grounds to defend itself and will take appropriate legal action. The company expects a favorable outcome and has stated that the tax demand will not impact its balance sheet or profit and loss account for the financial year.
The dispute highlights the complexities of India’s indirect tax regime, particularly with regard to the transfer of businesses and the application of GST. The outcome of the case will be closely watched by the business community, which is still grappling with the implications of the GST Act.