GST Tax Notices to Chocolate Firms and Bakeries for alleged GST Underpayment

Over a dozen bakery and chocolate businesses have received notices alleging massive GST underpayment between July 2017 and March 2023, as per a report.

The DGGI’s notices have raised concerns in the sector. The problem focuses on the GST rate that these businesses must pay. According to reports, the companies in question have been paying a GST rate of 5%, which is usual for restaurants. However, the DGGI claims that such establishments do not qualify as restaurants and should hence be subject to an 18% GST rate.

The DGGI offices in Mumbai and Ahmedabad have issued notices to well-known brands. The source mentioned in the report suggested that more notices could be issued as the inquiry progressed.

While the individual tax liabilities for the companies under investigation may not be significant, the industry’s total liability could reach Rs.1,000 crore, discounting potential penalties and interest.

Similar classification conflicts have emerged in the past, with ice cream parlours receiving notices from the DGGI ordering them to pay an 18% GST rate instead of the lower rate they had previously applied.

The incident underscores ongoing problems with the GST regime, particularly the classification of goods and services.

The DGGI’s crackdown could have a considerable impact on the businesses implicated, perhaps resulting in large additional GST payments, penalties, and interest.