Stanley Lifestyles Limited has disclosed that its wholly owned subsidiary, Stanley OEM Sofas Limited, has received a Show Cause Notice from the Office of the Deputy Commissioner of Commercial Taxes, Bengaluru. The notice, dated July 9, 2025, pertains to an alleged short declaration of turnover and non-reversal of Input Tax Credit, with an expected financial implication of ₹55.63 lakh.
| Particular | Details |
|---|---|
| Entity Concerned | Stanley OEM Sofas Limited (Wholly Owned Subsidiary of Stanley Lifestyles Limited) |
| Issuing Authority | Office of the Deputy Commissioner of Commercial Taxes (Audit)-4.1, Bengaluru |
| Date of Notice | July 9, 2025 |
| Section Under Which Notice Issued | Section 73 of the KGST Act, 2017 |
| Nature of Dispute | Alleged short declaration of turnover and non-reversal of Input Tax Credit on creditors outstanding beyond 180 days |
| Tax Period | April 2021 to March 2022 |
| Expected Financial Implication | ₹55.63 lakh |
| Breakdown of Claim | Tax: ₹2.74 lakh; Interest: ₹52.89 lakh (under KGST/CGST Act, 2017) |
| Penalty Imposed | None at this stage |
Details of the Notice
The Show Cause Notice, issued under Section 73 of the Karnataka Goods and Services Tax (KGST) Act, 2017, highlights two primary concerns for Stanley OEM Sofas Limited. The first relates to an alleged short declaration of turnover for the tax period spanning April 2021 to March 2022. This implies that the tax authorities believe the subsidiary reported lower sales or revenue than what was actually transacted, potentially leading to a shortfall in tax payments.
The second aspect of the notice concerns the non-reversal of Input Tax Credit (ITC) on creditors whose outstanding balances extended beyond 180 days. Under GST regulations, if a recipient of goods or services does not pay the supplier within 180 days from the date of invoice, the ITC claimed on such unpaid invoices must be reversed. This provision is designed to ensure timely payments to suppliers and prevent undue accumulation of ITC. The notice suggests that Stanley OEM Sofas Limited may not have complied with this specific requirement, leading to an incorrect claim of ITC.
Financial Implications and Company Response
The expected financial implication arising from this Show Cause Notice is ₹55.63 lakh. This amount is a combination of alleged unpaid tax and accrued interest. Specifically, the quantum of claim includes ₹2.74 lakh towards tax and a significant ₹52.89 lakh towards interest, calculated under the provisions of the KGST/CGST Act, 2017. It is important to note that, as per the company's disclosure, no penalty has been imposed by the authorities at this stage. The notice primarily seeks an explanation and potential recovery of the identified tax and interest amounts.
Stanley Lifestyles Limited has stated that the matter is currently under consideration by its wholly owned subsidiary, Stanley OEM Sofas Limited. The subsidiary is actively evaluating appropriate representations to be made in response to the Show Cause Notice. This indicates that the company intends to present its arguments and evidence to the tax authorities to clarify its position or contest the allegations. The process typically involves submitting a detailed reply to the notice, followed by potential hearings or further communication with the tax department.
Regulatory Context and Shareholder Impact
The disclosure of this Show Cause Notice by Stanley Lifestyles Limited is in compliance with Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. This regulation mandates listed entities to disclose any event or information that is material to the company, including litigation or regulatory actions that could have a significant financial implication. The company has also referenced SEBI Circulars dated December 31, 2024, and November 11, 2024, along with industry standards, underscoring its adherence to transparency norms.
While the financial implication of ₹55.63 lakh is not a substantial amount in the context of a large listed entity, any regulatory notice or potential tax liability can draw scrutiny. For shareholders, such disclosures provide insight into the operational and compliance risks faced by the company and its subsidiaries. The current notice represents a contingent liability, and its ultimate impact will depend on the outcome of the subsidiary's representations and the final decision of the tax authorities. Investors will likely monitor the progress of this matter to assess any potential long-term financial or reputational consequences for Stanley Lifestyles Limited. The company's proactive disclosure ensures that the market is informed about this development as required by regulatory guidelines.
