Zydus Lifesciences Faces ₹74 Crore Demand Over IGST Refund Calculation

Zydus Lifesciences Faces ₹74 Crore Demand Over IGST Refund Calculation

Issue: The Common Adjudication Authority raised a large tax demand against Zydus Lifesciences Ltd. for the alleged excess claim of Integrated Goods and Services Tax (IGST) refund on the export of goods, based on a dispute over the correct valuation method.

Facts:

• Zydus Lifesciences Ltd., a pharmaceutical firm, received a demand order from the Joint Commissioner of Common Adjudication Authority, CGST, Ahmedabad.
• The order covers the period from April 2018 to March 2024.
• The central issue is an alleged excess refund claim of IGST on the export of goods.
• The alleged excess refund arose from the company’s consideration of the CIF (Cost, Insurance & Freight) value instead of the FOB (Free On Board) value for the purpose of claiming the IGST refund.
• The demand order spans four GST registrations located in Gujarat, Maharashtra, Himachal Pradesh, and Goa.

Decision:

The Adjudication Authority determined the tax liability and issued a demand order totaling ₹74.23 crore, along with an equivalent penalty of ₹74.23 crore, plus applicable interest.

Key TakeDowns:

• Valuation Dispute: The dispute centers on the critical difference between FOB value (which typically excludes expenses incurred after export, like freight and insurance) and CIF value in calculating the maximum eligible IGST refund under export rules. * Financial Impact: The total disputed amount, including penalty, exceeds ₹148 crore plus interest.
• Company’s Stance: Zydus Lifesciences stated that it firmly believes it has a strong case and intends to challenge the order by filing an appeal with the appropriate appellate authority.
• Adjudication Consolidation: The order is a significant example of the Common Adjudication Authority mechanism being used to issue a single ruling that covers tax demands across multiple state GST registrations under the same PAN.