The state Goods and Services Tax (GST) department has slapped Piramal Enterprises Ltd (PEL) with a tax demand notice amounting to Rs 1,502 crore for alleged short payment, and non-payment of tax along with interest and penalties on the sale of pharma business.
About The Tax Demand Orders
The tax demand orders for the financial year 2020-21 were issued by the Deputy Commissioner of State Tax, Maharashtra after the Rs 4,487 crore slump sale by Piramal Enterprises of its pharma business to Piramal Pharma Limited (PPL) involving the transfer of subsidiary companies which the taxmen contends was not a slump sale but was a sale of items and therefore, 18% GST is payable on full value of sale (including goodwill).
The GST department further considered the sale of investments, which are generally outside the ambit of GST, as taxable transactions.
Primal Enterprises Strongly Challenges The Order
The order has been strongly challenged by Piramal Enterprises stating the GST, interest, and penalties levied were unjustified. The tax bill amounting to 15% of its revenue, Piramal Enterprises plans to challenge the state tax ruling and said it has “more than adequate grounds” to defend itself.
“The company expects a favourable outcome and it will take appropriate legal steps in this regard in its best interest,” said PEL in regulatory filings adding the tax demand will not affect its balance sheet or profit and loss account for the financial year.
About Piramal Enterprises
The leading Non-Banking Financial Company (NBFC) Piramal Enterprises is the flagship company of the Piramal Group with diversified business interests in retail and wholesale lending, alternative funds, and life insurance.
Meanwhile, the Ajay Piramal-led PEL consolidating its financial services business and plans to sell its stake in Shriram Group's insurance ventures for Rs 4,000-5,000 crore aiming to focus more on its core lending business.
Piramal Enterprises owns nearly a 15% stake in Shriram General Insurance Company and around 13.3 percent in Shriram Life Insurance Company. According to insiders, the general insurance stake sale could be worth Rs 3,000-4,000 crore while the life insurance stake is worth around Rs 1,000 crore, considering the premium the buyer has to pay for the bulk stake sales.
