Vedanta Receives ₹141.36 Crore GST Demand Over Ineligible ITC Claims

Global mining conglomerate Vedanta Ltd has been slapped with Goods and Services Tax ( GST ) penalties totaling Rs. 141.36 crore for allegedly availing ineligible Input Tax Credit ( ITC ). The Mumbai-listed company received two GST notices demanding the tax amount, applicable interest, and penalties.

GST Penalties:

• ₹86.06 crore penalty for availing and utilizing ineligible ITC during the 2017-18 financial year.
• ₹55.30 crore penalty for ineligible ITC claims spanning 2017-18 to 2019-20.

Vedanta has announced plans to challenge these orders, stating that it remains optimistic about a favorable outcome and does not expect any material financial impact from the ruling.

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According to the Free Press Journal report, Vedanta had already engaged in a legal battle over GST regulations. In October 2023, the GST Council recommended an 18% tax on a parent company’s corporate guarantee to its subsidiary and excluded director’s personal guarantees. This was later notified and a circular was issued, sparking legal challenges from corporations like Vedanta.

In January 2024, the Bombay High Court stayed the GST circular on corporate guarantees, responding to a petition filed by Vedanta. Similar stays were issued by Telangana and Punjab & Haryana High Courts.

The High Court allowed Vedanta to amend its petition, challenging the retrospective application of the rule, which set the valuation of such guarantees at 1% per annum of the loan guaranteed, effective from October 2023.

A division bench of Justices Firdosh P. Pooniwalla and B.P. Colabawalla allowed the revision of the petition and reaffirmed that a holding company's corporate guarantee to its subsidiary is not a 'supply' under GST law.

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