Tata Steel gets show cause notice worth ₹1,007 cr over input tax credit

Tata Steel Limited has been issued a show cause notice over alleged discrepancies in availing Input Tax Credit (ITC) totaling ₹1,007 crore during the period of the financial year 2018–19 to 2022–23.

The steel major got the notice from the Office of the Commissioner (Audit), Central Tax, Ranchi.

The notice, dated June 27 and received by the company on June 28, directs Tata Steel to explain why the Goods and Services Tax (GST) amount should not be demanded and recovered under Section 74(1) of the Central Goods and Services Tax (CGST) Act and the corresponding provisions of the State GST (SGST) Act, read with Section 20 of the Integrated Goods and Services Tax (IGST) Act, 2017.

In an exchange filing, the company said the show cause notice alleges that the ITC was availed in violation of provisions under Section 74(1) of the Central and State GST Acts, as well as Section 20 of the IGST Act.

Section 20 of the IGST Act, 2017 permits enforcement of certain provisions of the CGST Act—including audit, scrutiny, demands, penalties, and recovery—in relation to IGST matters too. This means measures under Section 74(1) of the CGST Act, typically applied for tax evasion or undue credit, also extend to IGST claims.

Tata Steel clarified that it has already deposited ₹514.19 crore, and this amount is set to be appropriated in the notice. Hence, the remaining GST liability under question is ₹493.35 crore.

Under GST law, businesses can claim credit for the input tax paid on goods or services used during manufacturing or operations, which can be set off against their GST liabilities on sales.

Under India’s GST framework, companies are allowed to claim input tax credit on goods and services used in their business operations, offsetting this against their output tax liability. However, improper claims may lead to tax demands and penalties.

Previous tax matters

In June this year, Tata Steel reported receiving a notice from the Office of the Commissioner of CGST & Central Excise, Jamshedpur, over alleged wrongful ITC claims amounting to ₹890.52 crore for FY2018–19 to FY2020–21.

On June 19, Tata Steel received another show cause notice regarding a subsidiary Tata Steel Long Products, from the Directorate General of GST Intelligence (DGGI), Jamshedpur. The case involved ITC claimed compensation cess on coal, amounting to ₹161.51 crore, for the period from April 2019 to February 2024. Of this, ₹160.28 crore was already reversed or paid, but the authorities have questioned its validity and proposed a penalty equal to the claimed amount.