DGGI begin Investigations into Pharma Companies for Fake ITC and Non-payment of GST under RCM

DGGI in another drive to curb GST Evasion learned that 41 lawsuits against large pharmaceutical companies in the country were filed in FY24.

Investigations into Pharma Companies for availing Fake ITC and Non-payment of GST

Reetu | May 16, 2024 |

DGGI begin Investigations into Pharma Companies for Fake ITC and Non-payment of GST under RCM

DGGI begin Investigations into Pharma Companies for Fake ITC and Non-payment of GST under RCM

In another effort to reduce GST leakages in various sectors, the Directorate General of GST Intelligence (DGGI) learned that 41 lawsuits against large pharmaceutical companies in the country were filed in FY24.

DGGI stated that pharmaceutical companies have evaded GST through brand transfer sales by the utilization of fake ITC on expired drugs, the use of bogus GST ITC for business support services, and non-payment of tax under the Reverse Charge mechanism.

In the previous financial year, pharmaceutical companies submitted roughly Rs.450 crore after receiving pre-show cause notices, and further investigations are still underway.

According to the data, the Directorate General of GST Intelligence (DGGI) Mumbai zone had the most cases, totalling almost 29 out of 41 total sales.

According to sources, Glenmark Pharmaceuticals paid the most GST due, distributed across two cases—approximately Rs.130 crore and Rs.40 crore—followed by Vicco Laboratories, who paid in two distinct cases, one of about Rs.95 crore and the other of about Rs.20 crore. Zydus Healthcare and Zydus Lifesciences are third on the list, having paid around Rs.45 crore and Rs.12 crore, respectively.

Other registered companies included Sun Pharma Laboratories Ltd, Sun Pharma Ltd, Biocon Ltd, Pfizer Ltd, Biocon Biologics, Wockhardt Ltd, Torrent Pharmaceuticals Ltd, Aurobindo Pharma Ltd, Cipla Ltd, Hetero Healthcare, Mylan Pharmaceuticals, Alembic Pharmaceuticals, Lupin Ltd, and others.

Biocon, a pharmaceutical company, stated that DGGI Mumbai has advised them about specific classifications of sales promotional expenses that are not eligible for GST credits. Biocon and Biocon Biologics have revoked the GST credits they claimed for this lead. The modified GST credit amount falls under this category and covers the financial years 2017-18 to 2022-23. There is no GST evasion by the company. We are dedicated to the highest standards of corporate governance.

Alembic Pharma stated that we are being served with a summons to explain the issues and submit facts. The issue is linked to the statute’s interpretation of the admissibility of input credit for certain ordinary operational business procedures. The GST department has different perspectives. There was a reversal of ITC credit against our available credits. There were no more queries or Show Cause Notices (SCNs) issued. To add, no case was filed against us in this regard.

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