Dreamfolks Services has received a Rs 1.57 crore show-cause notice from the Gurugram CGST office regarding Input Tax Credit claims for fiscal year 2021-22. The demand includes an equal amount of penalty related to a supplier whose GST registration was retrospectively cancelled. Management maintains that the supplier had initially deposited the tax and does not expect a material impact on operations.
Dreamfolks Services Receives Rs 1.57 Crore GST Demand
Total demand of Rs 1.57 crore includes tax and equal penalty.
Company maintains supplier deposited tax; no material financial impact expected.
Reader Takeaway: Disputed ITC claim regarding a cancelled supplier registration; firm is preparing a formal legal defense.
What just happened
Dreamfolks Services Ltd has received a Demand cum Show Cause Notice from the Commissioner of CGST (Audit), Gurugram, dated October 9, 2026. The tax authorities have raised a demand of Rs 1,57,73,334 for the fiscal year 2021-22. This amount consists of Rs 78,86,667 in IGST and an equivalent penalty of Rs 78,86,667.
Why this matters
The demand stems from Input Tax Credit (ITC) claimed by the company on invoices from a supplier whose GST registration was later cancelled by the department with retrospective effect. Under current GST regulations, discrepancies involving retrospective registration cancellations often trigger scrutiny of the recipient's tax filings. Investors track these notices as they reflect potential cash outflows and legal engagement costs.
The backstory
The dispute involves the validity of ITC claims during the 2021-22 period. Dreamfolks Services maintains that the supplier in question had originally deposited the applicable GST, which the company claims entitles them to the credit. The notice marks a procedural step in the audit cycle where the department seeks to recover credits deemed inadmissible due to the supplier's status changes.
What changes now
Management has explicitly stated that they do not expect a material impact on the company’s ongoing financial position or day-to-day operations. The company is currently drafting its response to the Commissioner. This reply will outline their contention and provide evidence that the tax in question was deposited at the source.
What to track next
Shareholders should monitor subsequent filings for updates on the adjudication process. The company is required to submit its reply within the prescribed legal timeline, which will likely lead to a formal order from the tax authorities. The outcome of this response will determine if the demand stands, is reduced, or is withdrawn.