Leading instrument cluster manufacturer Pricol is in the spotlight as it receives a show cause notice from the Directorate General of GST Intelligence, Gurugram Zonal Unit, amidst an industry-wide Goods and Services Tax ( GST ) investigation regarding the classification of instrument clusters.
The notice, disclosed in an exchange filing, raises concerns of a substantial tax demand, totaling INR 380 crore, coupled with interest and penalties. The investigation centers on the disparity between Pricol’s classification, taxed at 18 percent, and the department’s approach, which suggests a higher tax rate of 28 percent.
This development is not isolated to Pricol, as the filing indicates that the GST Department has initiated proceedings against various auto component manufacturers involved in supplying instrument clusters.
Pricol defends its classification method, asserting adherence to the GST scheme based on internationally accepted principles. The company categorizes instrument clusters under Chapter 90 of the Tariff Schedule as Speed Indicators and Tachometers, subject to an 18% GST rate.
The show cause notice questions this classification, proposing Chapter 87 instead, and highlights a potential demand exposure of INR 3800.5 million, with additional interest and penalty considerations.
Emphasizing that the notice is a preliminary proposal, Pricol clarifies that it is obligated to explain its classification method rather than immediately settle the demand. The filing underscores that such notices are not uncommon, citing a similar instance with its Andhra Pradesh unit, where the issue was resolved in the company’s favor.
The notice, received on February 5, 2024, was disclosed in the exchange filing on February 26, with the company attributing the delay to a comprehensive evaluation. Pricol sought legal counsel from M/s. Lakshmikumaran and Sridharan Attorneys, a reputable GST law firm, which provided its opinion on February 26, 2024, before the company communicated the details to stakeholders.
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