Muthoot Finance , a prominent non-banking financial company, has recently found itself in a tax dispute with the Kerala State GST Department. The company has received a tax demand order totaling Rs 1.52 crore, which it plans to contest.

Breaking Down the Tax Demand

The tax demand order from the Kerala State GST Department comprises:

The Crux of the Dispute

The tax demand stems from allegations that corporate guarantees provided by Muthoot Finance to its subsidiary are taxable under the GST Act. The company has raised objections regarding:

1. Misclassification
2. Valuation principle
3. Non-utilization of the guarantee

However, these objections were rejected by the tax authority.

Muthoot Finance's Stance

Muthoot Finance has firmly stated that it disputes the allegations made in the order. The company's official statement, as per the LODR (Listing Obligations and Disclosure Requirements) filing, asserts:

"The Company is of the firm view that the allegation raised in the Order is not tenable."

Next Steps

In response to this tax demand, Muthoot Finance has announced its intention to file an appeal against the order. The company is currently in the process of preparing this appeal.

Financial Impact

Despite the substantial amount involved in the tax demand, Muthoot Finance has assured its stakeholders that this development will not have a material impact on its financial, operational, or other activities.

Regulatory Compliance

The tax demand order was received by Muthoot Finance on July 22. In compliance with SEBI regulations, the company promptly disclosed this information to the stock exchanges.

As this tax dispute unfolds, investors and market watchers will likely keep a close eye on the appeal process and its potential implications for Muthoot Finance's financial statements in the coming quarters.

Muthoot Finance , a leading non-banking financial company (NBFC), has received a tax demand order from the Kerala State GST Department, totaling Rs 1.52 crore. The company plans to contest the order, asserting that the allegations are untenable.

Breakdown of the Tax Demand

The GST demand comprises:

Reason for the Demand

The tax authority alleges that corporate guarantees provided by Muthoot Finance to its subsidiary are taxable under the GST Act. The company's objections regarding misclassification, valuation principle, and non-utilization of the guarantee were rejected by the tax department.

Muthoot Finance's Response

Muthoot Finance strongly disputes the allegations raised in the order. The company has stated its intention to file an appeal against the demand. In a disclosure to the stock exchanges, Muthoot Finance emphasized that there would be no material impact on its financial, operational, or other activities due to this order.

Official Disclosure

According to the LODR (Listing Obligations and Disclosure Requirements) filing, the order was passed by the Office of the Deputy Commissioner, Adjudication-1, Ernakulam, State Goods and Service Tax Department, Kerala.

Legal Stance

Muthoot Finance maintains a firm view that the allegation raised in the order is not tenable. The company is in the process of filing an appeal to contest the tax demand.

Financial Impact

Despite the sizeable demand, Muthoot Finance has assured its stakeholders that there is no material impact on the company's financial, operational, or other activities due to this order.

The development highlights the ongoing challenges faced by financial institutions in interpreting and complying with GST regulations, particularly concerning inter-company transactions and guarantees. As Muthoot Finance prepares to appeal the order, the case may set an important precedent for similar situations in the financial services sector.