Mukesh Ambani-led Reliance to contest GST penalty order worth Rs 56.44 crore

Mukesh Ambani-led Reliance Industries Ltd (RIL) has stated in a regulatory filing on Friday to the stock exchange that it has received a penalty order worth Rs 56.44 crore from GST authorities. Reliance has also stated that it intends to file an appeal against the order.

The company’s decision to challenge the GST ruling will determine how the issue progresses, but as things stand, Reliance has maintained that its business operations remain unaffected, even as it prepares to take its next legal step.

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According to the exchange filing, the penalty order was issued by Ahmedabad’s Joint Commissioner of CGST on November 25, through an email.

The order stated that the company’s input tax credit should be treated as blocked credit.

“The Company has received an order dated November 25, from the Joint Commissioner, CGST, Ahmedabad imposing on the company a penalty of Rs 56.44 crore under Section 74 of the Central Goods and Services Tax Act, 2017, the Gujarat Goods and Services Tax, 2017 read with applicable provisions of the Integrated Goods and Services Act, 2017,” Reliance stated in its exchange filing.

The penalty order has raised questions about the interpretation of input tax credit (ITC) and whether Mukesh Ambani’s conglomerate will move to contest the order.

According to the GST penalty order, the penalty has been imposed under Section 74 of the Central GST Act, 2017, along with relevant provisions of the Gujarat GST Act and the Integrated GST Act. GST authorities claimed that the input tax credit claimed by the company falls under ‘blocked credit”.

However, Reliance has clarified that the conclusion was drawn without considering the classification of services provided by the service provider, which is central to determining the eligibility of input tax credit.

The company stated that the financial implications are restricted to the penalty amount itself, with no operational disruptions or impact on its core businesses.