Patanjali Foods has received Show Cause Notices from Uttarakhand tax authorities for FY23. The notices allege ineligible Input Tax Credit claims, proposing a ₹4.07 crore tax demand and a ₹72.56 crore penalty.
Patanjali Foods Receives Show Cause Notices from Tax Authorities
Total Tax Demand: ₹4.07 crore Penalty Amount: ₹72.56 crore Reader Takeaway: Company confident in contesting tax notice, but penalty remains a watch point. ## What just happened Patanjali Foods has disclosed that its Office of the Deputy Commissioner, State Tax Department, Uttarakhand has issued Show Cause Notices (SCNs). These notices pertain to the financial year 2022-23 and allege the availing of ineligible Input Tax Credit (ITC) and other discrepancies. The total tax demand proposed is ₹4.07 crore, comprising ₹1.14 crore for SGST, ₹1.14 crore for CGST, and ₹1.79 crore for IGST. Additionally, a substantial penalty of ₹72.56 crore has been proposed. The SCNs were issued under the Uttarakhand Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017, following an investigation into ITC claims for the financial year 2022-23. ## Why this matters These notices represent a potential financial liability for Patanjali Foods, although the company states it does not expect any liability at this stage. The significant proposed penalty of over ₹72 crore is a key figure for investors to note. The outcome of these proceedings could impact the company's financial performance. ## The backstory Patanjali Foods, formerly Ruchi Soya Industries, is a major player in the edible oils and food products sector in India. The company has undergone significant transformation and expansion in recent years. ## What changes now Patanjali Foods is preparing its response to the tax authorities in consultation with its tax advisors. The company plans to submit a formal response within the prescribed timelines, stating it has adequate grounds to contest the allegations. ## Risks to watch The primary risk is the potential financial impact if the company is unable to successfully contest the tax demand and penalty. The regulatory proceedings could also lead to prolonged uncertainty. ## Peer comparison While specific peer comparisons for tax disputes are not readily available, companies in the FMCG and food processing sectors are subject to Goods and Services Tax (GST) regulations, and such notices can occur across the industry. ## Context metrics (time-bound) The notices specifically relate to the financial year 2022-23. The company is expected to respond within the prescribed timelines, with the final implications to be determined upon conclusion of the proceedings. ## What to track next Investors should closely monitor future disclosures from Patanjali Foods regarding the progress and resolution of these Show Cause Notices and the final determination of any financial liability.
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