Lemon Tree Hotels has executed a joint venture agreement with RJ Corp Limited to develop the Aurika Shillong project. The deal involves a fresh equity issuance in the special purpose vehicle Arum Hotels Private Limited.

Carnation Hotels Private Limited, a wholly owned subsidiary of Lemon Tree Hotels, will retain a 51% stake in Arum. RJ Corp will acquire the remaining 49% by subscribing to 47,65,394 equity shares of face value ₹10 each. The transaction is expected to complete within seven days of the effective date.

Deal Structure

The joint venture changes the ownership structure of Arum Hotels, which ceases to be a step-down wholly owned subsidiary of Lemon Tree Hotels. It continues as a step-down subsidiary with shared governance.

RJ Corp is an unlisted public company engaged in beverages, dairy, quick service restaurants, retail, ice-cream and healthcare businesses. It is not related to the promoter group or group companies of Lemon Tree Hotels.

Governance Terms

The Board of Directors of Arum Hotels will comprise an equal number of directors nominated by both Carnation and RJ Corp. Neither party may transfer shares to third parties outside their respective affiliate groups without adhering to the agreement terms.

Financial Impact

Arum Hotels contributed NIL turnover and a net worth of ₹(12.97) lakhs, representing 0.00% of Lemon Tree Hotels’ consolidated financial statements during the last financial year. As this is a fresh issuance rather than a sale of existing stakes, Carnation does not receive any direct consideration from the transaction.

Lemon Tree Hotels material subsidiary Berggruen Hotels Private Limited received a GST demand notice totaling ₹5.63 crore from Bengaluru tax authorities on September 8, 2026.

The intimation, issued in Form GST DRC-01A by the Office of the Deputy Commissioner of Commercial Taxes (Audit), Bengaluru, ascertains tax, interest, and penalty under Section 73(5) of the CGST Act, 2017 for the financial year 2022-23.

Demand Breakdown

The total proposed liability comprises principal tax, accumulated interest, and a fixed penalty. The specific components are detailed below:

Alleged Violations

The tax authority cited five primary compliance failures for FY22-23 that triggered the demand:

• Mismatch between turnover reported in GSTR-3B and GSTR-1, leading to alleged short declaration of taxable turnover.
• Non-submission of purchase registers and supporting invoices to substantiate claimed Input Tax Credit (ITC).
• Failure to provide ageing and payment details for outstanding trade payables, resulting in proposed ITC reversal for amounts unpaid beyond 180 days.
• Non-substantiation of nil-rated or exempt turnover reported in GSTR-1, which was treated as taxable turnover.
• Non-substantiation of scrap sale income, resulting in alleged non-discharge of applicable GST liability.

What the Numbers Show

Interest constitutes approximately 41% of the total demand, while the penalty represents less than 7%. This structure indicates the liability is driven primarily by the principal tax shortfall and the duration of non-payment, rather than punitive measures alone.

Next Steps

Berggruen Hotels is evaluating the grounds raised in the intimation. The subsidiary intends to file its response and objections in Part B of Form GST DRC-01A within the prescribed timeline ending September 21, 2026. Further legal recourse may be pursued if a Show Cause Notice or adjudication order is subsequently issued.

Lemon Tree Hotels stated there is no material impact on financial operations except to the extent of the specified amount.