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Coca-Cola unit is the latest company to face taxman’s scrutiny for alleged evasion of GST

Hindustan Coca-Cola Beverages Pvt Ltd gets show-cause notice for allegedly not paying taxes on the promotional and marketing amount it received from parent. The company confirms receipt of notice, says it fully complies with regulations.

January 13, 2021 / 08:11 AM IST
HCCB is the latest company that has come under the gaze of authorities for alleged tax evasion.

HCCB is the latest company that has come under the gaze of authorities for alleged tax evasion.

A division of the department tasked with collecting goods and services tax (GST) has launched an investigation into the Indian bottling unit of Coca-Cola for alleged evasion of tax, said people familiar with the matter.

The probe by the Director General of Goods and Services Tax Intelligence against Hindustan Coca-Cola Beverages Pvt Ltd (HCCB) was opened after tax officials discovered that it had not paid taxes on the promotional and marketing amount it received from its parent, said one person.

Another person said HCCB, which makes and bottles beverages at its 15 factories in India, has not paid taxes worth Rs 242 crore, an amount calculated over the past five years. Coca-Cola has more than 15 bottlers in India, but only HCBPL has not paid taxes, this person said.

Both persons spoke on the condition of anonymity.

When contacted, HCCB confirmed the investigation and said it is in receipt of a show-cause notice from tax officials.

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“While our team is evaluating and analysing the same, we would like to reiterate that as an ethical business entity, Hindustan Coca-Cola Beverages (HCCB) operates in full compliance with the regulatory framework and within the ambit of the laws of the land, both in letter and spirit. We continue to extend all support to the relevant authorities to reach a conclusion. Having said that, in our understanding of the law, we are confident of our position in this matter.”

HCCB is the latest company that has come under the gaze of authorities for alleged tax evasion.

The Intelligence wing of GST sent show-cause notices to ride-hailing companies Uber and Ola, accusing them of not paying taxes.  Separately, income tax officials conducted searches in the offices of L&T, Zee Entertainment, Swiggy and Instakart (a related company of Flipkart) for allegedly faking input tax credit.

On the Coca-Cola case, Aarti Sathe, a tax lawyer, said one will have to see if the payments made by the parent to its subsidiary for promotion and marketing are in the nature of service attracting GST. Directorate General of GST Intelligence has issued the notice to HCCB because it has been contending that it’s (promotion) a service which the distributor provides to the manufacturer and hence GST is payable, according to him.

The government has stepped up examination of entities that attempt to evade tax and those efforts are bearing on collection. GST collections hit a record high of more than Rs 1.15 lakh crore in December and finance secretary Ajay Bhushan Pandey cited the efforts of authorities to ensure compliance and ferret out evaders as a vital reason for the uptick.
Tarun Sharma
first published: Jan 12, 2021 11:08 pm

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