Bombay High Court Stays Rs 2,500 Crore GST Demand Against Coca-Cola India
The Bombay High Court has issued an interim stay on a Rs 2,500 crore GST notice issued against Hindustan Coca-Cola Beverages Pvt Ltd by the Central Goods and Services Tax (CGST) Department. The relief was granted on 1 April, with the next hearing scheduled for 29 April. The stay was issued after the court challenged the tax department's reading of GST rules over the company's discounting policy, especially with regard to retrospective discounts given to distributors.
The Bombay High Court has suspended the enforcement of a whopping Rs 2,500 crore Goods and Services Tax (GST) notice against Hindustan Coca-Cola Beverages, holding that the ground for the tax notice seemed legally defective on the face of it. The stay is granted against a January show cause notice issued by the GST department charging the company with under-declaration of goods by retroactively charging discounts to distributors over seven years.
The department said the pricing structure enabled Coca-Cola to reduce the taxable value of its inputs. The distributors gave discounts to retailers initially, which Coca-Cola followed later in the form of retrospective adjustments—allegedly a tactic to minimize tax burden. The CGST Commissioner used Section 15(3)(a) of the CGST Act to sanction the disallowance of these discounts.
Nonetheless, the demand was contested by Coca-Cola India under the contentions that all discounts and prices were strictly in accordance with Section 15(1), which makes the transaction value the basis for calculating GST. The company asserted that its discount policy was clear, properly documented in its Distributor Management System, and had no intention of evading taxes.
A bench of justices B P Colabawalla and Firdosh Pooniwalla noted: "We find that a strong prima facie case is made out for staying the effect and implementation of the impugned order. We say so because we do not find at least prima facie that the reasoning used by the 3rd Respondent (CGST Commissioner) is correct."
The ad interim injunction restrains the authorities from taking coercive steps against the company pending hearing of the matter further on 29 April. The judgment can have precedent value in relation to how retrospect discounts are classified under Indian GST law and possibly has wider ramifications in relation to FMCG price practices in the nation.