Southern Magnesium & Chemicals faces GST demand of ₹30.32 lakh

1 min read Updated on 19 Jun 2026, 12:21 PM

Reviewed by

Jubin VScanX News Team

AI Summary

Southern Magnesium and Chemicals Limited received a GST demand notice of ₹30,32,204 from the Deputy Assistant Commissioner (ST), Special Circle, Rajamahendravaram Division, for alleged short payment of output tax for the period April 2025 to February 2026. The notice, dated June 5, 2026, was downloaded on June 12, 2026. The company stated it has a strong case on the merits and does not expect any financial impact, adding that it will contest the demand.

*this image is generated using AI for illustrative purposes only.

Southern Magnesium and Chemicals Limited has received a Goods and Services Tax (GST) demand notice of ₹30,32,204 from the tax authorities regarding alleged short payment of output tax. The notice, dated June 5, 2026, was downloaded by the company on June 12, 2026, and covers the period from April 2025 to February 2026. The company stated that it believes it has a strong case on the merits and does not anticipate any financial impact from this demand.

The demand was raised by the Deputy Assistant Commissioner (ST), Special Circle, Rajamahendravaram Division, under Section 74A(9)(i) of the CGST/AP GST Act, 2017. According to the disclosure made to the exchange, the notice pertains to an alleged short payment of output tax. The management has assessed the situation and indicated that the company will contest the matter, asserting that the demand is not tenable.

The following table outlines the key details of the regulatory disclosure:

Details of Event	Information
Name of the Authority	Deputy Assistant Commissioner (ST), Special Circle, Rajamahendravaram Division
Nature of Action	Demand Notice under Section 74A(9)(i) of the CGST/AP GST Act 2017
Demand Amount	₹30,32,204
Period of Demand	April 2025 to February 2026
Date of Receipt	June 12, 2026
Alleged Violation	Short payment of output tax
Expected Impact	No financial impact expected

The disclosure was submitted in compliance with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The filing was signed by N. Rajender Prasad, Managing Director and CFO of Southern Magnesium and Chemicals Limited.

Historical Stock Returns for Southern Magnesium & Chemicals

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
+4.59%	-1.00%	-3.01%	-11.26%	-41.78%	+288.55%

What legal precedents exist regarding Section 74A(9)(i) that could influence the outcome of this dispute?

How will the legal costs associated with contesting the demand affect Southern Magnesium's operational expenses in the coming quarters?

Could this GST scrutiny trigger similar audits or demands for other periods or subsidiaries of the company?

Quarterly and Annual Financial Performance

The fourth quarter of FY26 showed a profit of ₹5.87 lakh, compared to a loss of ₹6.91 lakh in the corresponding quarter of the previous year. Quarterly revenue from operations improved to ₹89.86 lakh from ₹81.12 lakh in Q4 FY25. Total income for the quarter reached ₹115.23 lakh, with other income contributing ₹25.37 lakh. The following table presents the key financial metrics for the full year:

Metric:	FY26 (₹ in Lakhs)	FY25 (₹ in Lakhs)
Revenue from Operations:	335.55	1,243.49
Other Income:	63.52	56.92
Total Income:	399.07	1,300.41
Cost of Materials Consumed:	199.28	562.94
Changes in Inventories:	11.15	71.48
Employee Benefits Expense:	82.15	132.37
Finance Costs:	37.95	14.71
Depreciation & Amortization:	3.77	6.10
Other Expenses:	40.91	85.55
Total Expenses:	375.21	873.15
Profit Before Tax:	23.86	427.26
Net Profit for the Year:	12.64	319.77
Earnings Per Share (₹):	0.42	10.66

Balance Sheet Highlights

The company's balance sheet as of March 31, 2026, showed total assets of ₹1,800.11 lakh, a decrease from ₹1,962.28 lakh in the previous year. Equity share capital remained unchanged at ₹300.00 lakh, while other equity increased to ₹1,004.82 lakh from ₹992.19 lakh. Current liabilities reduced to ₹495.29 lakh from ₹670.09 lakh, primarily due to the settlement of trade payables. Borrowings under current liabilities, however, rose to ₹466.83 lakh from ₹329.46 lakh.

Balance Sheet Item:	31.03.2026 (₹ in Lakhs)	31.03.2025 (₹ in Lakhs)
Property, Plant & Equipment:	23.49	29.92
Other Financial Assets (Non-Current):	596.52	225.00
Total Non-Current Assets:	621.25	256.15
Inventories:	814.51	971.61
Trade Receivables:	33.49	53.28
Cash & Cash Equivalents:	1.35	1.97
Other Bank Balances:	305.00	612.00
Total Current Assets:	1,178.86	1,706.13
Total Assets:	1,800.11	1,962.28
Equity Share Capital:	300.00	300.00
Other Equity:	1,004.82	992.19
Borrowings (Current):	466.83	329.46
Total Current Liabilities:	495.29	670.09

Cash Flow Statement

The cash flow statement for FY26 revealed net cash used in operating activities of ₹468.65 lakh, compared to net cash generated from operating activities of ₹473.27 lakh in the previous year. The operating profit before working capital changes stood at ₹1.88 lakh, against ₹393.93 lakh in FY25. Net cash generated from investing activities stood at ₹368.61 lakh, driven by movement in other bank balances of ₹307.00 lakh and interest received of ₹58.95 lakh. Net cash from financing activities was ₹99.42 lakh, with proceeds from short-term borrowings of ₹137.37 lakh partially offset by interest paid of ₹37.95 lakh. Cash and cash equivalents at the end of FY26 stood at ₹1.35 lakh, slightly lower than ₹1.97 lakh at the end of FY25.

Cash Flow Item:	FY26 (₹ in Lakhs)	FY25 (₹ in Lakhs)
Operating Profit before Working Capital Changes:	1.88	393.93
Net Cash from Operating Activities:	(468.65)	473.27
Net Cash from Investing Activities:	368.61	(545.30)
Net Cash from Financing Activities:	99.42	70.08
Net Change in Cash & Equivalents:	(0.62)	(1.96)
Closing Cash & Cash Equivalents:	1.35	1.97

Key Appointments and Auditor Report

The Board appointed M/s. D. Hanumanta Raju & Co., Company Secretaries, as secretarial auditors and M/s. K. S. Rao & Co., Chartered Accountants (Firm Registration No. 003109S) as internal auditors for the financial year 2026-27. Both firms were appointed at the Board meeting held on May 4, 2026. M/s. Brahmayya & Co., Chartered Accountants (Firm Registration No. 000513S), the statutory auditors, issued an unmodified opinion on the audited financial results for FY26, confirming compliance with Regulation 33 of the SEBI Listing Obligations and Disclosure Requirements Regulations, 2015. The results were reviewed by the Audit Committee and approved by the Board of Directors at their respective meetings held on May 4, 2026. The company's business activity falls within a single business segment, magnesium, as per IND AS 108 on operating segments.

Appointment Details:	Information
Secretarial Auditors (FY26-27):	M/s. D. Hanumanta Raju & Co., Company Secretaries
Internal Auditors (FY26-27):	M/s. K. S. Rao & Co., Chartered Accountants (Firm Reg. No. 003109S)
Statutory Auditors:	M/s. Brahmayya & Co., Chartered Accountants (Firm Reg. No. 000513S)
Auditor Opinion:	Unmodified
Board Meeting Date:	May 4, 2026

Historical Stock Returns for Southern Magnesium & Chemicals

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
+4.59%	-1.00%	-3.01%	-11.26%	-41.78%	+288.55%

What strategic measures is Southern Magnesium and Chemicals planning to reverse the ~73% revenue decline and restore profitability to FY25 levels in the coming fiscal year?

How does the significant rise in short-term borrowings (from ₹329.46 lakh to ₹466.83 lakh) alongside negative operating cash flow impact the company's ability to service debt and sustain operations in FY27?

Given the sharp drop in inventory from ₹971.61 lakh to ₹814.51 lakh, what does this signal about future production capacity and demand outlook in the magnesium sector?