Piramal Enterprises gets Rs.1,502 Crore Tax Demand Notice Over Pharma Sale

Piramal Enterprises Ltd (PEL) has received a Rs.1,502 crore tax demand notice from the state Goods and Services Tax (GST) department for alleged short payment and non-payment of tax, as well as interest and penalties on the sale of their pharma business.

The Deputy Commissioner of State Tax, Maharashtra issued tax demand orders for the financial year 2020-21 following Piramal Enterprises’ Rs 4,487 crore slump sale of its pharma business to Piramal Pharma Limited (PPL). The transfer of subsidiary companies was not considered a slump sale, but rather a sale of items. Therefore, 18% GST is payable on the full value of the sale, including goodwill.

The GST department considered the sale of investments, which are typically not subject to GST, as taxable transactions.

Piramal Enterprises challenged the order, claiming that the GST, interest, and penalties were unreasonable. Piramal Enterprises seeks to challenge the state tax verdict, claiming it has “more than adequate grounds” to defend itself. The tax bill amounts to 15% of its revenue.

PEL stated in regulatory filings that it expects a good conclusion and would take appropriate legal procedures in its best interest. The tax demand will not impact the company’s balance sheet or profit and loss account for the financial year.

Piramal Enterprises, the Piramal Group’s flagship company, is a significant non-banking financial company (NBFC) with diverse commercial interests in retail and wholesale lending, alternative funds, and life insurance.