Hero MotoCorp receives INR 17 crore tax notice from Delhi GST authorities

Hero MotoCorp, a prominent two-wheeler manufacturer in India, has disclosed that it has received a significant tax demand notice from the Delhi Goods and Services Tax (GST) authorities. This development was announced by the company on Sunday through a regulatory filing, shedding light on a complex tax situation that has arisen.

According to the company's statement, the tax demand stems from an order dated August 17, 2024, issued by the Office of the GST Officer, Government of National Capital Territory (NCT) of Delhi. The crux of the matter lies in the disallowance of input tax credit claimed by Hero MotoCorp for the financial year 2019-20.

The total amount demanded by the tax authorities is substantial, breaking down into three components:

1. Tax demand: INR 9,38,66,513

2. Interest: INR 7,32,15,880

3. Penalty: INR 93,86,651

These figures collectively amount to over INR 17 crore, representing a significant sum that the company is being asked to pay.

However, Hero MotoCorp has taken a firm stance on this issue. The company asserts that, based on its assessment, the tax demand is not sustainable under the law. They argue that the input tax credit, which has been disallowed by the GST Officer in New Delhi, was rightfully claimed by the company following the provisions of the GST law.

The company further explains that the disallowance appears to be rooted in non-compliance issues on the part of their suppliers. Hero MotoCorp contends that this supplier non-compliance should not be attributed to them, as it falls outside their control and responsibility.

In light of this situation, Hero MotoCorp has indicated its intention to contest the tax demand. The company has stated that it will take appropriate steps to address this issue, which includes filing an appeal against the order. This suggests that the matter may enter a legal or administrative dispute resolution process.

Despite the sizeable amount involved in the tax demand, Hero MotoCorp has assured its stakeholders that this development does not pose a material impact on the company's financials, operations, or other activities. This statement is likely aimed at reassuring investors and other interested parties about the company's financial stability and operational continuity in the face of this tax challenge.

This situation highlights the complexities that can arise in the interpretation and application of GST laws, particularly in cases where there are multiple parties involved in the supply chain. It also underscores the importance for companies to maintain robust documentation and compliance processes to defend their tax positions when challenged by authorities.

As this matter unfolds, it will be interesting to observe how the dispute resolution process progresses and what implications, if any, this case might have for other businesses operating under the GST regime in India.