SRF Limited, a prominent player in the Indian chemicals and polymer industry, is currently embroiled in a tax dispute following an IGST demand of Rs. 7 crores for services rendered by its R&D unit in Bhiwadi. The company’s R&D activities have been under scrutiny by the Additional Commissioner, CGST Alwar Commissionerate, who has alleged that the Bhiwadi R&D Centre did not issue cross charge invoices for services provided to the Dahej plant between July 2017 and March 2021. The demand further includes penalty and interest, totaling approximately Rs. 7 crores.

The Alleged Violation and Legal Position

The CGST department has claimed that SRF did not pay the Integrated Goods and Services Tax (IGST) under Section 74 of the CGST Act, 2017, in connection with the services provided. The total demand amounts to Rs. 7 crores, along with an equal penalty and applicable interest. However, SRF has already deposited the demanded amount under protest between May 2023 and July 2023, while asserting that the demand is erroneous.

The company has also submitted its stance to the relevant authorities, arguing that the demand does not hold under the provisions of Rule 28 of the CGST Act, 2017, which governs the valuation of goods and services between distinct or related persons. SRF’s management is confident that the demand lacks legal merit.

Impact on SRF's Financials and Legal Plans

According to SRF’s corporate compliance team, the financial impact of the Rs. 7 crores IGST demand is currently quantified, and while the company has deposited the amount, it has made it clear that the dispute will be contested. Based on legal advice, SRF believes the IGST demand is not legally tenable, and it intends to take the matter to the appropriate legal forums for resolution.

The ongoing legal dispute is unlikely to disrupt SRF's financial or operational activities, as the company has made provisions for the disputed amount, and its financial performance remains strong.

SRF’s Corporate Compliance and Future Steps

SRF Limited’s senior management is focused on resolving the issue through legal channels, confident that they will be able to contest the CGST demand effectively. The company's corporate compliance team, led by Rajat Lakhanpal, Sr. Vice President, will continue to handle the issue while maintaining SRF's commitment to following all tax laws and regulations.

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