Shriram Finance Faces GST Penalty due to disallowance of ITC on reverse charge mechanism payments

Shriram Finance Limited, an NBFC offering financial solutions, has received significant GST orders from the Tamil Nadu Tax Authority. The orders relate to certain disallowances for financial years 2020-21 and 2021-22.

The company has informed the stock exchanges on January 28th, 2026, about the receipt of GST orders dated January 27, 2026, from the Commercial Tax Officer, Chennai South, Tamil Nadu, imposing penalties of Rs 1,05,40,655 for the financial year 2020-2021 and Rs 50,35,342 for the financial year 2021-2022. The penalty pertains to a show-cause cum demand order issued to Shriram City Union Finance Limited, which was merged with Shriram Finance with effect from April 1, 2022.

For the financial year 2021, the tax authority has raised a demand of Rs 1,05,40,655 and levied an equal penalty of Rs 1,05,40,655. For the financial year 2021-22, the Tamil Nadu Tax Authority has raised a demand of Rs 50,35,342 and imposed a penalty of Rs 50,35,342. The total penalty levied by the tax authority for both financial years amounts to Rs 1,55,75,997.

According to the company’s disclosure, the demands for both financial years have arisen due to the disallowance of input tax credit (ITC) on the reverse charge mechanism payments and credit notes issued.

Shriram Finance has stated that there is no significant impact of the penalty order on the financial, operations or any other activities of the company. The company added that it is waiting for its tax consultant’s opinion on the Tamil Nadu GST demand orders.

The above disclosure was made under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) to both the stock exchanges, BSE Limited and National Stock Exchange of India Limited.