New trouble has emerged for Patanjali Group companies led by Baba Ramdev. Directorate General for GST Intelligence (DGGI) is comprehended to have issued two show-cause notices to Patanjali Group companies Patanjali Ayurved and Patanjali Foods.
As per the sources, DGGI (Directorate General for GST Intelligence) has sent 2 SCN before Patanjali group companies Patanjali Ayurved Ltd and Patanjali Foods Ltd dated 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 monitors GST leakages all across the country.
Also, DGGI has referred one matter of incorrectly claiming of ITC and non-payment of state GST duties to Uttarakhand GST authorities for detailed probe, as per the sources, in which Uttrakhand State GST is maintaining a detailed probe for alleged claiming illegal ITC and non-payment of GST on goods amount to Rs 2,100 crore.
By two divisions DGGI Meerut Zone and DGGI Chandigarh Zone, DGGI investigations were performed. A show cause notice issued by DGGI Meerut before Patanjali Ayurved Ltd; alleges companies for circular trading via issuing GST invoices without a concomitant supply of goods amounting to Rs 2,640 crore between the duration of 2018-2022.
Goods were subsequently routed back to the initial tax invoice issuing cos, therefore increasing the company’s turnover and revenue. As the goods came back to the company initially issuing invoices, GST due became nil but a fake ITC was generated and claimed by the company worth nearly Rs 15 crore.
Patanjali Ayurved claims the same bogus ITC, for which DGGI Meerut zone has issued an SCN, u/s 122(1)(ii), for the issuance of a tax invoice without a supply of goods concerning the taxable value of Rs 2,639.73 crore and ITC amounting to Rs 138.61 crore and as per the provisions of section 122 (1)(vii), to claim and use the ITC of Rs 134.90 crore without actual receipt of goods concerning Rs 2,596.39 crore.
It is not just this, provided the allegations, DGGI Meerut has started penal proceedings against Patanjali Ayurved’s Director Ram Bharat, CFO YD Arya, and two others of corresponding entities under section 122 (1A) and 122 (3)(a).
DGGI Chandigarh has furnished a second SCN before Patanjali Foods Ltd. As the sources in the same case stated DGGI Chandigarh in its analyses has alleged a bogus ITC claim via Patanjali Foods of around Rs 27.46 crore established on fake invoices issued by 7 fictitious firms, which were discovered to be non-existent.
DGGI Chandigarh has alleged the company Patanjali Foods Ltd for falsifying documents and furnishing goods-less invoices and DGGI Chandigarh has now started penal proceedings against MD of Patanjali Foods LTD Ram Bharat, u/s 122(1A) and 122 (3) (d).
The group is stating the alleged claims to both the GST divisions in our response in a due and legal manner, Patanjali spokesperson stated.
According to the circular trading transaction, once there is a dispute concerning the eligibility of credit, there has to be an equal reciprocal to the GST ITC on the output side, making these transactions revenue-neutral, or contra entries. There may be distinct legal implications, but there is no matter of tax evasion in a majority of the matters when output tax has been duly complied with and paid.
The position concerning Circular Trading has been explained by the Board and therefore the movement of goods and the definition of ‘supply’ must be addressed while finalizing the quantum of differential tax, if there is any in such transactions, a tax expert cited who is contending across distinct courts on this issue of Circular Trading.
