Pricol has received a showcause notice from the Directorate General of GST Intelligence, Gurugram Zonal Unit, which could lead to a tax demand of Rs 380 crore plus interest and penalty.
Pricol is a leading manufacturer of instrument clusters. According to an exchange filing, the notice was received "as part of an industry-wide Goods and Services Tax (GST) investigation, concerning classification of instrument clusters".
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While the company's way of classification would lead to a tax rate of 18 percent, the department's method would lead to a tax rate of 28 percent.
The exchange filing said that the company is not the only one facing such a demand from the department. It added that "proceedings have been initiated by the Department against various auto component manufacturers engaged in the supply of instrument clusters."
The filing explained what the company has relied on for following its method of classification: "Following the scheme of classification postulated under GST, which is based on internationally accepted principles, the Company had classified instrument clusters under Chapter 90 of the Tariff Schedule as Speed Indicators and Tachometers and supplied the same on payment of GST @18%."
In the filing, the company said that the department's point of view along with the financial impact it could have: "In the said Notice, the Department has called upon the Company to explain the classification of instrument clusters under Chapter 90, as against classification under Chapter 87 proposed by the Department. The potential demand exposure is around INR 3800.5 million. The Show Cause Notice also proposes to impose interest and penalty."
The filing highlighted that "the showcause notice is only a proposal to fasten a plausible demand based on the understanding of the Tax Department and the company is now only called upon to explain or justify its stand."
The company also stated that such notices from the department are not uncommon and that its unit in Andhra Pradesh was in receipt of a similar notice demanding payment of GST for alleged misclassification of instrument clusters. It added that the issue came to be decided in the company's favour and the Adjudicating Authority agreed with its classification under Chapter 90.
According to an exchange filing, the company received the notice dated February 5, 2024, from the zonal unit on February 15, 2024. In the February 26 filing, the company shared the reason for the delay in intimating exchanges.
It stated: "The Company wanted to disclose details of above said GST Show Cause Notice to stakeholders along with the details of the impact on the financial, operation or other activities of the Company due to the said notice. Therefore, we had approached M/s. Lakshmikumaran and Sridharan Attorneys, a leading law firm in GST practice, sought their opinion and after careful consideration of the matter, they provided their opinion on 26th February 2024."
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