Sun Pharma to pay Rs 1,602 crore penalty, tops list of 6 drug majors facing tax scrutiny

The regulatory actions highlight intensified financial audits and compliance monitoring within the pharmaceutical sector, with penalties ranging from a few crores to over Rs 1,600 crore. While some companies have contested these claims, others are preparing to challenge the orders in appellate courts.

Details of Regulatory Orders:

Sun Pharmaceutical Industries Limited

The Additional Commissioner of Central GST & Central Excise, Surat, has imposed a penalty of Rs 1,602 crore on Sun Pharma under Section 74(1) of the CGST Act. The penalty was levied on cross-charging of expenses. The company has stated that this will not have a material impact on its financials and intends to file an appeal against the order​.

Ipca Laboratories Limited

Ipca Laboratories received an Order in Original (OIO) from the Additional Commissioner, CGST & Central Excise, Ujjain Commissionerate, for the period 2017-18 to 2021-22. The company faces a tax demand of Rs 1.71 crore, along with an equal penalty under Section 122(2)(b) of the CGST Act. The violation pertains to the non-reversal of Input Tax Credit (ITC). Ipca has argued that the demand is not legally valid and will challenge the order in court​

Indoco Remedies Limited

Indoco Remedies had earlier received a Show Cause Notice (SCN) on August 22, 2024, from the Superintendent, Chennai GST Authority, over excess ITC claims and GSTR-9C reconciliation issues. However, in a favorable ruling, the GST Authority dropped the proceedings against the company, dismissing a potential demand of Rs 16.37 lakh​

Aurobindo Pharma Limited

Aurobindo Pharma was issued a tax demand of Rs 77.61 crore by the Additional Commissioner of Central Tax, Ranga Reddy GST Commissionerate, Hyderabad. The order pertains to excess IGST refunds, non-surrender of IGST on export proceeds, and non-reversal of ITC. The company has already paid Rs 23.71 crore under protest and reversed ITC worth Rs 8.78 crore, but intends to appeal against the order​.

Lupin Limited

Lupin received an Order-in-Appeal from the West Bengal GST Appeal Authority on February 5, 2025, imposing a penalty of Rs 2.28 crore under the CGST, SGST, and IGST Acts. The order was based on the alleged wrongful availment of ITC for FY 2017-18. The company maintains that the penalty is arbitrary and unjustified, asserting that there will be no material impact on its financials. Lupin plans to file an appeal against the order.

Dr. Reddy’s Laboratories Limited

Dr. Reddy’s Laboratories received an order from the Commissioner of Central Tax, Medchal Commissionerate, Hyderabad, on February 3, 2025, imposing a penalty of Rs 1.58 crore under the Central Excise Act, 1944. The order alleges that the company was sanctioned a refund erroneously. The company has stated that the penalty will not impact its financials or operations and is considering filing an appeal .

All six pharma firms have indicated that the regulatory actions will not materially impact their financials or operations. While Indoco Remedies successfully defended itself, the remaining companies plan to challenge the orders through legal channels.