Patanjali Group firms under DGGI scanner for non-payment of GST, fake ITC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Fresh troubles seem to be in the offing for Patanjali Group companies led by Baba Ramdev. Directorate General for GST Intelligence (DGGI) is understood to have issued 2 show-cause notices to Patanjali Group companies — Patanjali Ayurved and Patanjali Foods.

According to sources, “DGGI has sent two show cause notices to Patanjali group companies — Patanjali Ayurved Ltd and Patanjali Foods Ltd on April 19, 2024, for alleged non-payment of GST and wrongfully claiming Input Tax Credit (ITC).”

The Directorate General of Goods and Service Tax Intelligence is the GST law enforcement agency that tracks GST leakages nationwide.

Separately, DGGI has also referred one case of wrongfully claiming of ITC and non-payment of state GST duties to Uttarakhand GST authorities for detailed probe, sources added, where now Uttrakhand State GST is carrying a detailed probe over alleged claiming wrongful ITC and non-payment of GST on goods worth ₹2,100 crore, sources said.

Also Read: Patanjali’s lies force India to look at other Ayurvedic drug makers

DGGI investigations were undertaken by two divisions – DGGI Meerut Zone and DGGI Chandigarh Zone, sources said. “DGGI Meerut issued show cause notice to Patanjali Ayurved Ltd; alleges companies for circular trading by issuing tax invoices without a concomitant supply of goods worth ₹2,640 crore between the period 2018-2022,” sources in the know of the development said.

Adding, “Goods were later routed back to initial tax invoice issuing cos, thus inflating turnover and revenue of the company. Since the goods came back to the company initially issuing invoices, GST due became nil but fake ITC was generated and claimed by the company which is worth about ₹15 crore.”

“This fake ITC was claimed by Patanjali Ayurved, for which DGGI Meerut zone has issued a show cause notice, under section 122(1)(ii), for issuance of tax invoice without a supply of goods involving the taxable value of ₹2,639.73 crore and ITC amounting to ₹138.61 crore and under provisions of section 122 (1)(vii), for availing and utilizing ITC amounting ₹134.90 crore without actual receipt of goods involving ₹2,596.39 crore,” sources said.

Not just this, given the allegations, “DGGI Meerut has initiated penal proceedings against Patanjali Ayurved’s Director Ram Bharat, CFO YD Arya and two others of related entities under section 122 (1A) and 122 (3)(a),” sources added.

Also Read: Patanjali Foods weighs a proposal to buy non-food business from Patanjali Ayurved

The second show cause notice has been issued by DGGI Chandigarh to Patanjali Foods Ltd. Sources in this matter shared that “DGGI Chandigarh in its investigations has alleged fake ITC claim by Patanjali Foods of about ₹27.46 crore based on fake invoices issued by seven fictitious firms, which were found to be non-existent.”

Sources further added, “DGGI Chandigarh has alleges the company — Patanjali Foods Ltd for forging documents and issuing of goods-less invoices and DGGI Chandigarh has now initiated penal proceedings against MD of Patanjali Foods LTD – Ram Bharat, under section 122(1A) and 122 (3) (d).”

Meanwhile, Patanjali spokesperson responding to these developments told CNBCTV18, “The group is clarifying the alleged claims to both the GST divisions in our reply in a due and legal manner.”

“In a circular trading transaction, once there is a dispute with respect to the eligibility of credit, there has to be an equal reciprocal to the tax paid on the output side, making these transactions revenue neutral, or contra entries. While there could be several legal implications, there is no case of tax evasion in most of the cases when output tax has been duly complied and paid.

Even the Board has clarified the position with respect to Circular Trading and hence the movement of goods and the definition of ‘supply’ needs to be addressed while finalising quantum of differential tax, if any, in these transactions,” said Abhishek A Rastogi, founder of Rastogi Chambers, who is arguing across several courts on this issue of Circular Trading.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow