Whalesbook
SMS Pharmaceuticals has received a substantial reduction in its tax demand for Assessment Year 2018-19 following a rectification order from the Income Tax Department. The initial demand of ₹7.19 crore has been lowered to ₹40.28 lakh, marking a decrease of 94.5%. The company stated that this development is not expected to materially impact its financial or operational activities.
This significant cut brings considerable financial relief, transforming a potential strain from a tax demand exceeding ₹7 crore into a much more manageable liability. While penalty proceedings continue, this outcome alleviates immediate financial pressure.
The Hyderabad-based pharmaceutical manufacturer, established in 1990, had disclosed receiving the ₹7.19 crore income tax demand notice, along with separate penalty proceedings under Section 270A for alleged under-reporting of income, on March 31, 2026. SMS Pharmaceuticals specializes in Active Pharmaceutical Ingredients (APIs) and intermediates, with manufacturing facilities approved by international bodies like the USFDA and EUGMP, and exports to over 70 countries.
The primary tax demand has been drastically reduced. However, penalty proceedings under Section 270A remain active and are pending appeal. The company is seeking to halt these penalty proceedings until its appeal before the Commissioner of Income Tax (Appeals) is resolved.
SMS Pharmaceuticals operates within India's competitive pharmaceutical sector, alongside peers such as Sun Pharmaceutical Industries, Divi's Laboratories, Laurus Labs, and Torrent Pharmaceuticals. Companies in this industry often navigate complex regulatory environments and global tax compliance requirements.
In fiscal year 2024, SMS Pharmaceuticals reported a 35% year-on-year increase in revenue, reaching ₹709.26 crore.
Investors and observers will monitor the company's next steps regarding the tax rectification, the outcome of the penalty proceedings, and the progress of its appeal.