Maruti Suzuki India (MSI) is the country’s largest car manufacturer. Has announced that a Haryana GST appeal authority has upheld a tax demand of Rs 139.3 crore against it. The demand is on account of tax liability under the reverse charge mechanism on certain services. Between July 2017 and August 2022.
History of the GST Appeal
The GST authorities had initially demanded Rs 139.3 crore. Maruti Suzuki had even cleared the amount before it received a show-cause notice. Dated September 28, 2023. The bone of contention here is the principle of reverse charge mechanism (RCM). It is the recipient of certain services that pay the Goods and Services Tax (GST) rather than the supplier.
The period concerned is five years, from July 2017 to August 2022. In the impugned five years, the respondent company was liable to pay tax under the reverse charge mechanism for certain services. However, there was some problem relating to the payment of tax, due to which the demand notice was issued. Subsequently, the appellant, Maruti Suzuki, preferred the appeal.
GST Appeal: Appellate Decisions
On Wednesday, Maruti Suzuki said in a regulatory filing that the Commissioner. Appeals has passed an order sustaining the tax demand. In the order, it was confirmed that the demand of Rs 139.3 crore. Against the liability of tax under reverse charge mechanism was correct.
Maruti Suzuki had already paid the amount even before the receipt of the show cause notice. But the appeals authority sustained the demand also, and then the company furthered its legal steps against the tax demand.
Next Steps of Maruti Suzuki
Maruti Suzuki has planned to present an appeal after the order has been decided by the appeals authority. As stated by the company in its release. It will file an appeal against the appellate order before the Tribunal which would happen to be the next legal forum for disputing tax-related matters.
Maruti Suzuki said this order and the appeal that follows will not much affect the automobile firm’s financials situation or its daily operations. In response to regulatory filing, the automaker clarified that there would be no huge chaos or disruption to its business activities caused by the order.
Impact of this Judgment on the Finances of Maruti Suzuki
The amount is hefty enough, but what is heartening for investors and stakeholders? This is the fact that Maruti Suzuki does not perceive this tax liability as creating any material financial burden on it. Its better-than-average financial health makes it capable of swelling its balance sheet. By such costs without impacting its operational efficiency or market position.
Shares of Maruti Suzuki closed 0.35 per cent higher at Rs 11,963.15 on the Bombay Stock Exchange on Wednesday, showing the market hasn’t reacted hostilely to the development.
Conclusion: A Law Sues
The fact that Maruti Suzuki is appealing the order of the GST authority. Shows that it stands by its cause and wants to go through all avenues of appeal. Although Rs 139.3 crore is a pretty hefty amount, the way the company has responded to it reflects that it is self-assured. That it won’t be bothered much and will not see any significant day-to-day operational or financial disruption to itself in the legal system.
This is going to be one of the most-watched appeals. As it would act as a precedent for all other businesses that were affected by this controversial mechanism of GST, reverse charge.
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