Muthoot Finance Limited, one of India’s largest non-banking financial companies (NBFCs) focused on gold loans, has disclosed that it has received a tax demand and penalty order from the Office of the Assistant Commissioner, Central Goods and Service Tax (CGST), Division I, Noida, Uttar Pradesh. The disclosure was made to the stock exchanges on September 13, 2025, in compliance with Regulation 30 of SEBI’s Listing Obligations and Disclosure Requirements (LODR), 2015.

The order, dated September 12, 2025, has imposed a tax demand of ₹95,73,071 along with a penalty of ₹95,73,071, amounting to a total liability of ₹1,91,46,142. Despite the imposition, Muthoot Finance has categorically stated that it believes the allegations are not tenable and confirmed its intention to file an appeal against the order.

Details of the Order

According to the company’s disclosure, the order was passed under Section 74 of the CGST Act, 2017, which deals with tax demand cases involving alleged fraud, willful misstatement, or suppression of facts.

The order cites two key issues:

1. Input Tax Credit (ITC) on Supplies from Cancelled Registrations: The company allegedly availed ITC of ₹95,70,326 from suppliers whose GST registrations had been cancelled retrospectively.

2. Ineligible ITC from Debit Notes: A smaller amount of ₹2,745 was considered ineligible, as the debit notes in question were issued by suppliers who had not filed their GSTR-3B returns.

The total of these two alleged violations formed the basis for the demand and penalty.

Company’s Response

Muthoot Finance has clarified that it is of the firm view that the allegations raised in the order are not valid. The company is already in the process of preparing and filing an appeal against the order, as per the legal framework available under the CGST Act.

Importantly, the company has assured shareholders and stakeholders that the order has no material impact on its financials, operations, or other business activities. This statement indicates that the company views the issue as a disputed liability rather than an accepted obligation.

Disclosure in Line with SEBI Guidelines

The company has complied with disclosure requirements under Regulation 30 of SEBI’s LODR regulations and the recent SEBI circular SEBI/HO/CFD/CFD-PoD-1/P/CIR/2023/123 dated July 13, 2023.

The filing included an Annexure A, detailing the name of the authority, nature of the order, date of receipt, alleged violations, and the company’s assessment of the impact. This ensures transparency for investors and maintains adherence to corporate governance standards.

No Material Impact on Business

In its disclosure, Muthoot Finance stressed that the order does not have any material financial or operational impact on the company. Considering Muthoot Finance’s scale of operations and financial performance, the disputed liability of ₹1.91 crore is relatively small and not expected to affect its day-to-day functioning or overall profitability.

Broader Context: Tax Demands and NBFCs

Tax demand orders against large companies, including NBFCs, are not uncommon in India. Often, these arise due to interpretational issues regarding eligibility of Input Tax Credit (ITC), retrospective cancellations of GST registrations, or procedural lapses by vendors.

In many such cases, companies prefer to contest the orders through appeals, as the financial and reputational stakes are high. The process often involves multiple stages, including appeals to higher tax authorities, tribunals, and sometimes courts.

For Muthoot Finance, a well-established NBFC with a strong financial base, this order is seen as part of routine compliance challenges rather than a serious financial threat.

Impact on Investors and Shareholders

While the immediate market reaction to such disclosures can vary, Muthoot Finance’s clear statement that the order does not materially impact its financials is expected to reassure investors.

Investors generally evaluate such disclosures based on three factors:

• Materiality: Whether the order could significantly impact the company’s financial results.

• Likelihood of Appeal Success: The strength of the company’s case in higher forums.

• Reputation Impact: Whether the issue could affect the company’s credibility with regulators and stakeholders.

In this case, Muthoot Finance has positioned the development as a non-material issue, which may limit any negative sentiment in the markets.

Conclusion

The GST demand and penalty order of ₹1.91 crore issued against Muthoot Finance Limited by the CGST Division in Noida highlights the continuing complexities of India’s GST compliance environment. While the order cites ITC issues linked to retrospective supplier cancellations and non-filing of returns, Muthoot Finance has strongly disagreed with the allegations and is preparing an appeal.

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