Kirloskar Oil Engines Limited (KOEL), a prominent player in the manufacturing sector, has recently come under scrutiny from Maharashtra's tax authorities. The company has received a show cause notice from the Office of Deputy Commissioner of State Tax, Pune, Maharashtra, regarding an Input Tax Credit (ITC) mismatch for the financial year 2021-22 under GST regulations.

Details of the Tax Demand

The show cause notice proposes a substantial financial implication for KOEL:

This total demand of approximately Rs 18.7 crore stems from discrepancies identified in the company's Input Tax Credit claims for FY 2021-22.

Company's Response

In response to this development, Kirloskar Oil Engines Limited has stated that it does not foresee any material impact on its financial operations or other activities. This assertion suggests that the company is confident in its position and may be prepared to address the issues raised in the show cause notice.

Regulatory Compliance

As per the regulatory requirements, KOEL has duly informed the stock exchanges about this notice. The company filed an intimation under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This prompt disclosure aligns with the company's commitment to transparency and regulatory compliance.

Recent Corporate Actions

It's worth noting that amid these tax-related developments, Kirloskar Oil Engines Limited continues to progress with its employee stock option plan. The company's Stakeholders Relationship Committee allotted 25,651 fully paid-up equity shares of Rs. 2 each under the 'Kirloskar Oil Engines Limited – Employee Stock Option Plan 2019 [KOEL ESOP 2019]'. This allotment has resulted in a slight increase in the company's issued, subscribed, and paid-up capital.

As the situation unfolds, stakeholders will be keenly watching how Kirloskar Oil Engines Limited addresses the GST-related issues while maintaining its operational momentum. The company's response to the show cause notice and any subsequent developments will be crucial in determining the final outcome of this tax matter.

Kirloskar Oil Engines Limited (KOEL), a prominent player in the manufacturing sector, has received a Show Cause Notice from the Office of Deputy Commissioner of State Tax, Pune, Maharashtra, for alleged misclassification in outward supply due to incorrect Harmonized System of Nomenclature (HSN) codes under GST regulations.

Details of the Notice

The notice, dated September 19, 2025, outlines the following demands:

The total amount in question sums up to approximately ₹8.02 crore, which includes penalties, interest, and tax demands.

Company's Response

In response to the notice, Kirloskar Oil Engines Limited has stated that it does not foresee any material impact on its financial operations or other activities. The company has disclosed this information to the stock exchanges in compliance with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Regulatory Compliance

KOEL has promptly informed the BSE Limited and the National Stock Exchange of India Ltd. about this development. The company's disclosure includes details as required under the SEBI regulations, demonstrating its commitment to transparency and regulatory compliance.

Business Continuity

Despite the regulatory notice, Kirloskar Oil Engines appears to be continuing its regular business operations. On the same day as the GST notice, the company held virtual meetings with representatives from Morgan Stanley Research and Aikya Investment Management, focusing on operational overviews. The company assured that no unpublished price-sensitive information was discussed during these meetings.

Conclusion

While the GST notice raises questions about Kirloskar Oil Engines' classification practices, the company's swift disclosure and assertion of no material impact suggest a proactive approach to addressing the issue. Stakeholders and investors will likely keep a close eye on how this matter unfolds and its potential implications for the company's financial statements in the coming quarters.