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Dabur- The Science of Ayurveda is a FMCG brand who captured the market by focusing strictly on its core business and manufactured only quality and cost efficient consumer products. The demand for Ayurvedic products grew a lot in market due to products launched by Patanjali and this became a blessing in disguise as Dabur also started to expand its brand through its products like hair oil, toothpaste, and home care, Digestives and Candies, Health Supplements etc.
In the June 2023 quarter, Dabur announced improvement in the demand trends for their products in both urban and rural India. Also Dabur acquired Badshah Masala with effect from 2nd January 2023 with which the company entered in to branded spices market in India. Dabur now has announced a expected growth of 10% in the spices industry. But on October 16th, Dabur’s fortune seems to go off track as the Company announced to BSE that it has received a Goods and Service Tax demand notice of Rs 320.6 crore. Well that’s a pretty huge amount!
Let us understand Why Dabur received GST Notice??
Dabur received GST Notice from Directorate General of Goods and Services Tax Intelligence, Gurgaon Zonal Unit. The company announced that it has received intimation of tax ascertained as being payable wherein the GST short paid/not paid amounting to Rs 320.6 crore and has been advised to pay along with the applicable interest and penalty failing which show cause notice will be issued.
The company has got this notice because it has failed to pay GST on some of its products. The company has been issued an intermittent notice which can be challenged in the court by the company if the company feels the notice sent is inappropriate.
Dabur’s Response to the Notice
Well Dabur has clarified that it will take this notice to court and challenge the same based on its strong merits by way of filing its reply/submissions before the relevant authorities. Also it has clarified that the notice will not have any impact on financial, operational or any activities of the company. The impact will be limited to the extent of final tax liability as may be ascertained along with interest and penalty, if any.
Is Dabur the First Company to Receive Such a Huge GST Notice ??
No, There are many companies in line before Dabur who have received GST Notice for non payment of GST Amount. Online gaming companies like Dream 11, have received GST demands of humongous amount when the tax rate was fixed at 28% on the full value of the transaction. Almost 80 Gaming companies across the country have been recipients of show cause notices demanding a huge tax some of them dated back to 2017. Tax payers have concluded this as retrospective taxation.
Overall the GST department has issued more than 50000 notices to several companies and partnership firms across sectors, including real estate, jewellery etc. The notices served could be for different reasons, including misdeclaration, tax not paid, short-payment, wrongly availed above. input-tax credit, incorrect classification of goods/services and export items, mismatch in sale and purchase of items. Almost all tax payers is waiting for the GST Appellate Tribunal to be set up and start functioning at the earliest. The reason is The tax payers can appeal with appellate at the earliest. The GST Council has take one more incremental step towards this by prescribing the technical criteria to be met for appointment as a judicial member of the tribunal and the age limits of the president of the tribunal and its members.
AI Generated Mass Notices by GST
The notices have been issued without the human application and most of the companies have claimed that the notices are sent without reviewing any supporting documents or confirming whether the taxpayers have already addressed the issues. Many individuals who have filed their returns, but the department is issuing notices through AI, alleging discrepancies. These actions are taken by AI without any human judgment, and such mismatches can occur for multiple reasons. Taxpayers who have received these notices have been granted a 30-day window to respond and if they fail to provide a satisfactory clarification for the alleged discrepancies, the GST authorities intend to crystallise the demand by December 31, 2023. With a massive number of notices issued, handling the responses within the stipulated time frame becomes a difficult task. The automatic nature of these notices could also mean that responses may be processed mechanically, raising concerns about due diligence by the GST department.
Conclusion
Dabur has decided to challenge the notice in the court of law and further clarifications will be received in future with regards to the GST notice. Now whether Dabur has received such a huge amount of notice due to system error or whether Dabur has failed to pay GST needs to be waited and watched. The company has however assured its investors that the operations and financials will not get effected with the notice and the company will manage the discrepancy allegations responsibly.
