Bombay HC Puts Stay on GST Demand of Rs 2,500 Crore Against Coca-Cola India

The Bombay High Court has issued an interim stay on the GST notice of Rs 2,500 issued to Hindustan Coca-Cola Beverages Pvt Ltd by the Central Goods and Services Tax (CGST) Department. This relief was provided on April 1, and the next hearing is on April 29, 2025. The stay was issued after the court raised question on the tax department’s reading of GST rules, especially regarding retrospective discounts provided by the company to its distributors.

The GST department issued the notice in January, claiming that the company was under-reporting the value of its goods by retroactively charging discounts to its distributors over the past seven years. The Bombay High Court has put a hold on this notice, saying that the reason for issuing the tax notice seemed legally defective at first glance.

According to the tax department, the pricing system allowed Coca-Cola to lower the taxable value of its inputs. Distributors gave discounts to retailers upfront, and later, Coca-Cola followed in the form of retrospective adjustments, which the department saw as a way to reduce its tax liability. The CGST commissioner used Section 15(3)(a) of the CGST Act to say such discounts shouldn’t be allowed for tax benefits.

However, Coca-Cola India challenged the GST demand, arguing that all its prices and discounts followed Section 15(1) of the CGST Act, which says GST should be based on the actual transaction value. The company said its discount policy was transparent, well-documented in its Distributor Management System, and there was no attempt to evade taxes.

A bench of Justices B. P. Colabawalla and Firdosh Pooniwalla said that Coca-Cola has a strong initial case and, therefore, put a hold on the GST demand. They said that, at first glance, they do not find that the reasoning used by the CGST Commissioner is correct. The interim order stops the authorities from taking any coercive action against the company until the next hearing on April 29.