Pricol has been issued a show cause notice by the Directorate General of GST Intelligence, Gurugram Zonal Unit, potentially resulting in a tax demand of Rs 380 crore plus interest and penalty.
A leading manufacturer of instrument clusters, Pricol disclosed in an exchange filing that the notice was received “as part of an industry-wide Goods and Services Tax (GST) investigation regarding the classification of instrument clusters”.
While the company’s classification method implies a tax rate of 18 percent, the department’s approach would entail a tax rate of 28 percent.
The filing revealed that Pricol is not the sole recipient of such demands from the department, stating that “proceedings have been initiated by the Department against various auto component manufacturers engaged in the supply of instrument clusters.” The company justified its classification method, relying on “internationally accepted principles” under GST, classifying instrument clusters under Chapter 90 of the Tariff Schedule as Speed Indicators and Tachometers and supplying them with GST @18%.
The notice calls upon the company to explain its classification under Chapter 90, as opposed to the department’s proposed classification under Chapter 87. The potential demand exposure is approximately INR 3800.5 million, with interest and penalty also proposed.
Emphasizing that the show cause notice is merely a proposal based on the department’s interpretation, the company clarified that such notices are not unusual. It mentioned a similar notice received by its Andhra Pradesh unit, which was eventually resolved in its favor.
The company received the notice on February 5, 2024, from the zonal unit, and disclosed the details after seeking legal opinion from M/s. Lakshmikumaran and Sridharan Attorneys, a prominent law firm in GST practice, on February 26, 2024, explaining the delay in informing the exchanges.
