Shriram Finance Limited has received a penalty order from Uttar Pradesh tax authorities related to GST violations by its erstwhile subsidiary. The company informed stock exchanges about the regulatory development on December 17, 2025, in compliance with listing obligations.

GST Penalty Details

The Office of the Deputy Commissioner, State Tax, Lucknow, Uttar Pradesh, issued the order dated December 16, 2025, imposing penalties under Section 73 of the Central Goods and Service Tax Act, 2017, read with the Integrated Goods and Services Tax Act, 2017.

The penalties relate to show cause cum demand notices against erstwhile Shriram City Union Finance Limited, which was amalgamated with Shriram Finance effective April 1, 2022.

Nature of Violations

The GST demand has arisen on account of multiple contraventions identified by the tax authorities:

• Short payment of GST due to difference in applicable tax rate on scrap sale
• Non-payment of GST under reverse charge on incentives paid to recovery employees
• Availment of ineligible Input Tax Credit (ITC) under the provisions of Section 17 of the GST laws
• ITC booked in FY2020-21 but claimed in FY2021-22
• Non-submission of supporting/sample invoices corresponding to inward supplies as disclosed in Table 8A of GSTR-9
• GST demand on payments made to individual Direct Selling Agents (DSAs) on which tax was not discharged under the Reverse Charge Mechanism

Company's Response and Impact Assessment

Shriram Finance has stated that there are no material impacts on the company's financial, operational, or other activities. However, based on the quantum of the amount involved and out of commercial prudence, the company is awaiting an opinion from its tax consultant against the Uttar Pradesh state demand order.

The company has fulfilled its regulatory disclosure obligations by informing BSE Limited and National Stock Exchange of India Limited about the penalty order in accordance with Regulation 30 of the SEBI Listing Regulations.

Shriram Finance has officially responded to market rumors regarding a potential $5 billion investment by Japan's Mitsubishi UFJ Financial Group (MUFG) for a 20% stake in the company. The non-banking financial company has clarified that no binding agreement is currently in place with the Japanese financial institution.

Company's Official Response

The company's statement addresses recent market speculation about the substantial foreign investment. Key clarifications from Shriram Finance include:

Board Meeting Announcement

Shriram Finance has scheduled a board meeting for December 19, specifically to discuss fund raising initiatives. This meeting suggests the company is actively exploring various capital raising options, though no specific commitments have been made.

Investment Speculation Timeline

Earlier reports had suggested varying investment amounts from MUFG, with initial speculation around $3.20 billion for a 20% stake, later revised to over $4 billion, and now rumors circulating about a $5 billion investment. The company's clarification comes amid this evolving speculation about the potential deal size.

Market Context

The clarification provides transparency to investors and stakeholders amid ongoing market speculation about foreign investment in India's non-banking financial services sector. While no formal agreement exists currently, the scheduled board meeting indicates the company's continued focus on exploring strategic funding opportunities.