Rathi Steel Faces ₹3.06 Crore UP Tax Demand, Plans Legal Fight

Rathi Steel And Power Ltd. has received a significant demand order from the Uttar Pradesh State Goods and Services Tax (SGST) department. The order requires payment of approximately ₹3.06 crore, comprising the principal tax, an equal penalty, and applicable interest. This demand stems from alleged issues related to tax credit claims and payment mechanisms.

The company has firmly refuted the claims, asserting that the demand is not maintainable. Rathi Steel And Power Ltd. intends to contest the order through legal channels and stated that it foresees no material financial or operational impact from this situation.

This tax demand, if ultimately upheld, would represent a substantial financial burden, equivalent to nearly 19% of the company's profit after tax for the third quarter of FY25. Consolidated revenue for that quarter stood at ₹333.64 crore, with a profit after tax of ₹16.21 crore. Navigating tax disputes can also divert management focus and incur significant legal expenses.

Rathi Steel has had prior regulatory interactions, including a show-cause notice from the Securities and Exchange Board of India (SEBI) in 2020 concerning alleged insider trading violations. The Indian steel sector broadly faces periodic scrutiny on tax and regulatory compliance. Larger peers like Jindal Steel & Power and JSW Steel often possess more robust compliance frameworks and greater financial capacity to manage such demands or legal challenges.

The primary risk for Rathi Steel is the financial liability from the tax demand, penalty, and accumulated interest, should its legal challenge prove unsuccessful. Ongoing litigation could also lead to increased legal and administrative costs. Shareholders will monitor the progress of the company's legal challenge and management's commentary on the proceedings.