Bajaj Receives Notice To Pay ₹138 Crore Tax, Appeal Sent To Court

Bajaj Auto has received a fresh notice from Maharashtra’s tax authorities regarding irregularity in the taxes it has paid thus far. The Deputy Commissioner of State Tax in Pune, where Bajaj’s headquarters are, has alerted the company that it needs to pay an outstanding ₹1,38,53,14,020, with a further penalty of ₹13,85,49,375. 

The dispute raised here concerns the GST structure that Bajaj has used for its custom made spare parts. According to Bajaj’s stock market intimation document, “The tax demand mainly relates to differential tax liability between specific HSN classification adopted by the Company with GST rate of 18% as against general HSN classification of auto parts alleged by tax authorities with GST rate of 28%. According to tax authorities, Company being a manufacturer of automobiles, the entire spare parts being customised product, used only in manufacturing of vehicles would get classified as auto parts at GST rate of 28% disregarding the principle of general rules of interpretation. The Order also imposes applicable interest and penalty of Rs 13,85,49,375.”

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The issue lies that the tax authorities feel that Bajaj has been wrongfully calculating the taxes for certain divisions of its two- and three-wheeler manufacturing business, opting for the lower 18 percent rate. However, Bajaj authorities are confident that there is very little ‘merit’ in the case put forward and have appealed for the same. The Pune-based manufacturer has mentioned that it has followed the procedures diligently on the matter for over three decades and such discrepancies would have very little standing in the court of law. 

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We hope that this order doesn’t spiral into a big matter of concern for the bikemaker, who is likely to be the saviour of KTM from its financial troubles. And even though Bajaj believes that such a huge tax implication shouldn’t affect the financials of the company, its stock performance has been taking a hit. Steady performance in the commuter motorcycle and three-wheeler business as well as asserting authority in the EV space will help matters for Bajaj.