Whalesbook
Ponni Sugars (Erode) Ltd. has reported receiving a ₹9.35 crore demand notice from GST authorities, adding to its recent tax-related scrutiny. The company, which posted revenue of ₹421 crore in FY24, stated it disputes the allegations and intends to contest them through legal channels.
GST Demand Issued
The notice, dated April 28, 2026, was issued by the Additional Commissioner of GST and Central Excise. It alleges violations of the CGST Act, 2017, and TNGST Act, 2017. Specifically, the authorities claim the company wrongly availed Input Tax Credit (ITC) and failed to pay Goods and Services Tax (GST) as required.
Company's Stance and Financial Risk
Ponni Sugars firmly disputes these claims, stating they are legally untenable and expects no material financial impact from the notice. The company plans to pursue legal recourse to resolve the matter. While the company projects no immediate operational changes, this dispute introduces an element of uncertainty regarding future tax liabilities, including potential interest and penalties if the demand is upheld.
History of Tax Disputes
This GST demand follows a series of tax-related challenges for the sugar manufacturer, which operates a 3500 TCD mill and a 19MW Cogeneration plant. In January 2026, a Transfer Pricing Officer (TPO) proposed ₹34.05 crore in adjustments for AY 2023-24. In March 2026, another tax order addressed the Arm's Length Price for inter-unit bagasse transfers for AY 2021-22. However, the company also has a history of successful tax litigation, including a favorable ruling from the Madras High Court in March 2025 concerning assessment reopening.
Industry Context
Ponni Sugars operates in India's competitive sugar sector alongside peers such as Dhampur Sugar Mills Ltd. and Balrampur Chini Mills Ltd. Balrampur Chini Mills, for example, is recognized for its consistent profitability relative to companies like EID Parry (India) Ltd. The current tax dispute represents a specific operational risk for Ponni Sugars, separate from its diversification into areas like cogeneration.
Looking Ahead
Investors will be closely watching the company's legal proceedings and any further communication from GST authorities. Key developments to track include the company's formal response, potential interim orders, and the overall trajectory of its legal defense.