The New Year has begun on a sour note for Corporate India rattled with a series of tax demand notices from Goods and Services Tax (GST) for pending dues and penalties. Most multinational companies (MNCs) grappling with challenges like the taxation of expatriate salaries by Indian units and delays in business deals are now faced with tax demand notices of several thousand crores.
Public sector insurance major Life Insurance Corporation of India (LIC) was slapped with a GST demand notice of ₹806 crore on New Year's day while Hindustan Unilever received a GST demand notice of ₹447.5 crore the next day.
Similarly, a series of tax demand notices were issued to Asian Paints, Eicher Motors, ICICI Prudential and Nestle India for pending GST dues and penalties for FY19 and FY20.
While the insurance sector has been hit with ₹5,500 crore bills, the gaming industry faces a staggering cumulative demand for ₹1.5 lakh crore and the real estate sector asked to cough up ₹2,000 crore.
“About 33,000 GST notices have been issued by authorities for return discrepancies and short tax payments in FY18 and FY19,” confirmed a senior GST official.
Tax demand notices cast shadows over mergers and acquisitions plans
While most corporations insisted the tax demand notices did not directly affect business operations. Still, they cast shadows over mergers and acquisitions (M&As) planes forcing them to recalibrate their strategies for tax liabilities before finalizing deals and transactions.
According to GST officials, the surge in tax demand notices is due to time limitations. “Relaxations during the Covid-19 pandemic led to a backlog of tax demands and prompted authorities to issue notices to avoid time-related disputes. Data analytic tools flag discrepancies in tax returns and trigger automated notices,” explained the GST official.
The GST tax demand time limitation deadline for FY19 was initially December 31, 2023, and extended to March 31, 2024, leading to the sudden surge of notices issued to Corporate India to pay taxes and penalties.
