Lyka Labs has received a ₹0.73 crore show cause notice for alleged improper IGST refunds on exports. The company disputes the claim, citing a change in CGST rules, and states no material financial impact.

Lyka Labs Receives ₹0.73 Crore IGST Refund Notice

Lyka Labs Limited faces a ₹0.73 crore demand notice regarding alleged improper Integrated Goods and Service Tax (IGST) refunds on exports.

Reader Takeaway: Company disputes tax claim citing rule changes; management asserts no material financial impact.

What just happened

The Office of the Principal Commissioner of CGST & Central Excise, Mumbai East, has issued a Show Cause-cum-Demand Notice to Lyka Labs. The notice pertains to the alleged improper availment of IGST refunds on exports made under Advance Authorization between April 2020 and October 2024.

Why this matters

This notice signifies a potential financial liability for the company if the demand is upheld. However, Lyka Labs has formally disputed the claim, which could mitigate any immediate negative impact.

The total demand of ₹0.73 crore is broken down as follows:

• ₹0.52 crore (₹51.96 lakh) for IGST against Advance Licenses (Apr 2020 - Mar 2024)
• ₹0.16 crore (₹15.96 lakh) for IGST against Advance Licenses (Apr 2024 - Oct 2024)
• ₹0.05 crore (₹5.30 lakh) on exports (0.1% tax rate, Apr 2020 - Mar 2024)

The backstory

The GST authorities allege that Lyka Labs received a "double benefit" by claiming ineligible IGST refunds on exports while also availing tax exemptions on imports under the Advance Authorization scheme. This is cited as a contravention of Rule 96(10) of the CGST Rules, 2017.

What changes now

Lyka Labs is actively contesting the notice. Their defense hinges on the argument that Rule 96(10) of the CGST Rules, 2017, was omitted effective October 2024 without a saving clause, rendering the proceedings legally untenable. The company is exercising its right to defend itself against these allegations.

Risks to watch

The primary risk is the potential financial impact if the company's legal defense is unsuccessful. However, management's stance suggests confidence in their position, citing the omission of the specific rule.

Investor Takeaway

While tax demand notices are not uncommon, Lyka Labs' active dispute of this ₹0.73 crore claim, based on regulatory rule changes, is key. Management's assertion of no material financial impact should be monitored as the case progresses. Investors should track future updates on this regulatory matter.