Mahindra & Mahindra Ltd (M&M) has disclosed a penalty exceeding Rs 56 lakh due to an error related to the carry-forward of input service distributor credit from the pre-GST era to the GST regime. This penalty, imposed by the office of the Assistant Commissioner, Division-IV, CGST & Central Excise, Ahmedabad South, specifically pertains to Mahindra Two Wheelers Ltd (MTWL), which was previously demerged and later amalgamated with M&M.
Details of the Penalty
The penalty, totaling Rs 56,04,246, was revealed in a regulatory filing by Mahindra & Mahindra. According to the company, the penalty was imposed due to the erroneous carry-forward of Input Service Distributor (ISD) credit from the pre-GST regime to the GST regime. The regulatory filing clarified that this specific issue was related to the two-wheeler business of Mahindra.
Grounds for the Penalty
The regulatory filing explained the basis for the penalty, stating, “The order has been passed on the basis that closing balance of Input Service Distributor (ISD) credit available in pre-GST regime was wrongly carried forward into GST regime.” This error triggered the imposition of the penalty by the tax authorities.
Company’s Response and Future Actions
In response to the penalty, Mahindra & Mahindra conveyed their intention to appeal the decision. The company is optimistic about a favorable outcome at the appellate level. The regulatory filing included the company’s statement: “Based on our assessment, an appeal will be filed, and we are hopeful of a favourable outcome at the appellate level. We do not reasonably expect the said order to have any material financial impact on the company.”
Errors in the transition from the pre-GST era to the GST regime continue to be a source of regulatory scrutiny for businesses. While Mahindra & Mahindra faces a substantial penalty, the company remains confident in the appeal process and emphasizes that the financial impact is not expected to be material. This incident underscores the importance for businesses to ensure accurate compliance during transitional phases in tax regimes and highlights the ongoing challenges in adapting to complex taxation structures.