Sundrop Brands Faces Rs 26.38 Crore GST Tax Demand

Total demand of Rs 26.38 crore includes a penalty of Rs 2.40 crore for FY 2022-23.
The company is actively contesting the notice, asserting all relevant tax liabilities were previously discharged.

Reader Takeaway: Management disputes the demand, claiming prior compliance with tax payments on exports and reverse charge liabilities.

What just happened

Sundrop Brands Ltd (formerly Agro Tech Foods Limited) has received a show cause notice from the Deputy Commissioner (SGST), Sector-7, Ghaziabad, Uttar Pradesh. The notice, issued under Section 73 of the UPGST/CGST Act, 2017, follows a scrutiny of the company's GST filings for the 2022-23 financial year. The total demand amounts to Rs 26.38 crore, of which Rs 2.40 crore represents a penalty.

Why this matters

For investors, the notice represents a potential financial liability that could impact cash reserves if the company fails to successfully defend its position. While the company has communicated that it expects no immediate material impact on its operations, tax litigations of this size warrant attention as they move through the legal process.

The company defense

Sundrop Brands has stated that the authorities failed to account for tax liabilities that were already settled. The company asserts that:

• Tax payments for deemed supplies were already made.
• Export operations were managed under the compliant Letter of Undertaking (LUT) mechanism.
• Relevant liabilities were covered under the Reverse Charge Mechanism.

What happens next

The company is in the process of drafting a formal, documented response to the GST authorities. Shareholders should track future exchange filings for updates on the adjudication process and any potential resolution of the dispute.