JK Tyre Slapped With Rs 7.2-Crore Penalty By GST Authority Over Input Tax Credit Row

JK Tyres and Industries Ltd. on Monday said it has been slapped with a penalty of Rs 7.2 crore by the GST Authority over a row involving the input tax credit for compensation cess.

The company has been charged of not reversing the ITC for compensation cess on coal for the period from July 2017 to March 2022, related to the domestic portion of its Karnataka GST turnover, "which remained unused in the electronic credit ledger", according to an exchange filing.

The penalty order was issued by the Additional Commissioner of Central Tax, Mysore. The tax authority, in its order dated Dec. 12, alleged that JK Tyre availed ITC pertaining to compensation cess on "domestic portion of Karnataka GST turnover" to the extent of Rs 7.2 crore.

Out of this amount, the tax department has appropriated Rs 70.7 crore, and accordingly, there is a "net demand" of Rs 13 lakh from the company, the filing added.

"The department has also demanded interest (not quantified) and imposed penalty of Rs 720.11 lakh (Rs 7.2 crore)," it further said.

JK Tyre, in its regulatory filing, pointed out that the ITC for compensation cess on the domestic portion has been reversed, except for Rs 1.3 crore, "which is due to a difference in calculation methods used by the department, and this is debatable".

The company also believes there is no "reason to impose interest or penalties as there was no intention to use the ITC, as the final products do not attract compensation cess".

JK Tyre added that it has a strong case to appeal against the GST authority's order before higher authorities.

"The order does not have a significant impact on the company’s financials, operations, or other activities," the tyres manufacturer further noted.