Gujarat High Court Quashes Rs 43.43-Crore GST Demand Against Amul

The Gujarat High Court has ruled in favour of the Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets Amul products, quashing a Goods and Services Tax (GST) demand of Rs 43.43 crore imposed over expenses incurred by its head office for services provided to branches and depots.

A bench of Justices A S Supehia and Vaibhavi D Nanavati set aside the January 1, 2025, order issued by the Additional Commissioner of Central GST, Ahmedabad South, which had confirmed an Integrated GST demand of Rs 43,43,12,441, along with interest and penalties.

The dispute concerned common corporate expenses incurred at Amul’s head office in Anand between July 2017 and March 2019. These included advertising, legal services, information technology systems and other administrative costs. Amul had not allocated these expenses to its branches through a mechanism known as “cross-charging”, under which one unit raises an invoice on another for shared services.

The GST department argued that separately registered branches were distinct entities under the law and that the services provided by the head office were taxable. It alleged that the failure to cross-charge the expenses resulted in unpaid tax.

CBIC Rules and Absence of Fraud Weaken Tax Department’s Case

The High Court relied on clarifications issued by the Central Board of Indirect Taxes and Customs (CBIC) concerning the valuation of services between separately registered units of the same organisation.

Under the applicable clarification and Rule 28 of the Central Goods and Services Tax Rules, 2017, the value of certain internally supplied services may be treated as nil where the prescribed conditions are satisfied, including the absence of an invoice and the recipient's eligibility for full input tax credit.

The court noted that the department did not dispute that Amul’s head office had not issued tax invoices to its branches for the services in question. It held that the authorities could not calculate the taxable value merely by distributing common expenses among branches according to their turnover.

The court also questioned the invocation of Section 74 of the CGST Act, which permits extended tax demands in cases involving fraud, wilful misstatement or suppression of facts with the intent to evade tax.

It observed that the expenses were recorded in Amul’s books, ledgers and balance sheets, and that the department had not established deliberate tax evasion. The court consequently quashed the demand, along with the associated interest and penalty.

The ruling highlights the importance of applying prescribed GST valuation rules and establishing evidence of intentional tax evasion before invoking stringent demand provisions.