The Directorate General of GST intelligence claims that Sun Pharma is liable to pay service tax on payments it had made to affiliates of Ranbaxy outside India regarding arbitration. Considering the 2014 deal where Sun Pharma had acquired Ranbaxy, Sun Pharma was also supposed to clear the arbitration payments which were due by Ranbaxy to Daiichi. Thus, with these arbitration proceeds paid by Sun Pharma, the revenue authorities have claimed that these proceeds come under the service tax purview and that’s how Sun Pharma is likely to clear the tax dues. Since this is a tax due for the payments Sun Pharma had made before the roll-out of GST, this becomes a service tax due.

While confirming the development, a senior official at DGGI said the "directorate is currently in talks with Sun Pharma about the service tax dues. After detailed investigation, the Kochi zone office of DGGI booked the case in February-2019. Since then the company is contesting the claims and a show cause notice will soon be served to the company."

Source : CNBC TV18

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