Cipla believes Rs. 53 Lakh GST Penalty ‘arbitrary and irrational’ and Plans to Appeal

Cipla Ltd, a familiar name in India for over-the-counter medicines, inhalers, and Cofsil lozenges, stated on Thursday that the GST authority in Lucknow has issued a penalty of Rs. 53.1 lakh under the Goods and Services Tax Act.

In a report to the National Stock Exchange, the pharmaceutical company stated that it got the order dated November 13 from the office of the principal commissioner of Central Goods and Service Tax and Central Excise in Lucknow on Wednesday.

According to the GST authority’s order, Cipla reportedly used an inadmissible TRAN-1 credit, and the fine attempted to collect it with interest and penalties. “The penalty levied is arbitrary and unjustified,” the company stated in the filing, adding that it intends to submit an appeal with the appellate body.

TRAN-1, short for “Transition Form-1,” is typically filed by individuals or companies who are entitled to a tax credit for taxes paid prior to the GST regime, such as VAT or service tax. Prior to GST, taxes were levied in a variety of ways, including on raw materials, semi-furnished commodities, and so on. Filing a TRAN-1 form is the GST council’s attempt to streamline taxes and related credits in order to bring accounts into compliance with the new GST regime.

The company stated that the penalty order has no meaningful impact on its finances or operations. Cipla’s shares, which had risen when the markets started on Thursday, fell by 0.32 percent following the regulatory news. In comparison, industry peer Dr Reddy’s was down 0.67 percent in morning trading, while Sun Pharma sank 1.25 percent.

Cipla’s One-India umbrella includes its branded, trade generics, and consumer health businesses. It increased by 10% in the last reported financial year 2023-2024, owing to an increase in demand for branded prescription and trade generics. Cipla also anticipates continued growth throughout its core treatments portfolio in FY 2024-2025.