Aurobindo Pharma is currently embroiled in a substantial tax dispute, facing a Goods and Services Tax (GST) demand of ₹169.83 crore. This demand arises from the Ranga Reddy GST Commissionerate concerning previous input tax credit (ITC) refunds. The company intends to contest this order in the Telangana High Court.
GST Demand Breakdown
On February 18, 2026, Aurobindo Pharma received orders detailing the tax demand, which is split evenly between the disputed GST amount of ₹84.91 crore and an equivalent penalty of ₹84.91 crore. The company has characterized these demands as related to alleged improper refunds of accumulated ITC under Rule 89 of the Central Goods and Services Tax (CGST) Rules for the period spanning September 2022 to December 2022.
Nature of the Dispute
The crux of the issue pertains to refund claims originating from the company’s Export Oriented Unit (EOU) Unit 3. These claims involve accumulated ITC on zero-rated supplies of goods that were exported without tax payment under a Letter of Undertaking (LUT). Initially, the GST department sanctioned these refunds after verifying the company’s assertions that no domestic sales of the exported goods occurred from this unit.
However, the GST department later contested the refund sanctions. They argued before the Additional Commissioner (Appeals) that similar products were available in the domestic market, which should have influenced the calculation of the eligible refund.
Appellate Authority Ruling
In 2023, the appellate authority ruled in favor of the GST Department, prompting Aurobindo Pharma to file writ petitions challenging this decision before the Telangana High Court. The case is currently awaiting resolution in court.
Citing Precedents
In its defense, Aurobindo Pharma referenced a ruling from the Karnataka High Court involving Tonbo Imaging India Pvt Ltd. This precedent struck down a similar condition related to refund calculations, suggesting a potential basis for Aurobindo’s appeal.
Protective Measures by GST Department
To safeguard revenue, the GST Department had previously issued show cause notices for the September to December 2022 period. Following the disputes, the department has confirmed the demand for taxes, including interest, and has levied an equal penalty.
Company’s Financial Position
Despite these challenges, Aurobindo Pharma has stated that the tax orders will not materially impact its financial position or operational capabilities. The company remains committed to pursuing an appeal before the Commissioner of Central Tax (Appeals) in Hyderabad.
Market Response
Following the announcement of the tax demand, Aurobindo Pharma’s shares experienced a modest increase of 1.07% on February 19, reaching ₹1,172.00 on the National Stock Exchange (NSE). This response indicates that investor confidence may not be significantly shaken by the ongoing tax dispute.
Conclusion
Aurobindo Pharma is navigating a complex tax challenge, but its proactive approach through legal recourse and strong financial management may mitigate potential impacts. As the situation develops, the company’s ability to effectively communicate its position will be crucial in maintaining stakeholder confidence. The outcome of the court proceedings could set a significant precedent in the realm of GST refunds for similar cases.
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