Cipla slapped with Rs 53L GST penalty for alleged TRAN-1 credit misuse, plans legal challenge
Mumbai: Drug major Cipla Limited has disclosed that the Office of the Principal Commissioner of Central Goods & Services Tax (GST) and Central Excise in Lucknow has imposed a penalty of Rs 53,09,449 on the company. This penalty, under the provisions of the Central Goods and Services Tax Act, 2017, relates to the alleged improper use of TRAN-1 credit. The credit in question was availed by Cipla during the transition to the GST regime, and the GST Authority has claimed it was inadmissible under the law.
This disclosure, made under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, was communicated to stock exchanges, including BSE Limited and the National Stock Exchange of India, as well as to the Luxembourg Stock Exchange. Cipla received the official order dated November 13, 2024, on November 27, 2024, as detailed in a regulatory filing.
The GST Authority has alleged that Cipla availed inadmissible credit under the TRAN-1 mechanism, which was introduced during the transition to the GST regime. TRAN-1 credit allowed businesses to carry forward eligible tax credits from the pre-GST indirect tax system into the GST framework. The Authority has not only ordered the recovery of the disputed amount but has also imposed a penalty along with applicable interest under the CGST Act, 2017.
The TRAN-1, or "Transition Form-1," is a form used by individuals or organizations eligible to claim tax credits for taxes paid under the pre-GST regime, such as VAT or service tax. Before the implementation of GST, taxes were levied in multiple forms, including those on raw materials and partially finished goods. The introduction of the TRAN-1 form was part of the GST Council’s effort to streamline tax credits and align financial records with the unified GST system, ensuring a smooth transition from the previous tax framework to the new regime.
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In its disclosure, Cipla has firmly stated that the penalty levied is "arbitrary and unjustified."
The company plans to challenge the order by filing an appeal with the appropriate appellate authority. Cipla emphasized that its assessment of the facts and applicable laws supports its view that the GST Authority’s penalty lacks merit.
Despite the penalty, Cipla has assured its stakeholders that there will be no material impact on the company’s financial performance or operations. The company reiterated its commitment to resolving the issue through due legal processes while maintaining operational stability.
The disclosure aligns with SEBI’s updated compliance guidelines, as outlined in Circular No. SEBI/HO/CFD/CFDPoD-1/P/CIR/2023/123 dated July 13, 2023.
Cipla intends to file an appeal challenging the GST Authority’s order in the coming weeks. The outcome of the appeal will determine the final resolution of this matter. The company has assured stakeholders that it will remain compliant with legal and regulatory requirements while pursuing the necessary legal recourse.
