Bajaj Finance is under scrutiny for allegedly evading ₹341 crore in taxes by mislabeling service charges as interest, risking an ₹850 crore penalty. The company faces accusations of wrongly categorizing charges to benefit from tax exemptions, as per reports.
Bajaj Finance is under scrutiny for allegedly evading ₹341 crore in taxes by mislabeling service charges as interest, risking an ₹850 crore penalty. The company faces accusations of wrongly categorizing charges to benefit from tax exemptions, as per reports.
Bajaj Finance has received a ₹341 crore show-cause notice from the Directorate General of Goods and Services Tax Intelligence (DGGI) alleging tax evasion by wrongfully categorising a service charge as an interest charge in an August 3 notice, as per an Economic Times report.
"Intelligence collected reveals that Bajaj Finance Ltd is evading GST by wrongly treating services/processing charges as interest to avail the benefit of exemption provided under central tax rules," the report cited the 160-page notice stating.
Bajaj Finance did not respond to queries, the report said.
Livemint could not independently verify the report.
The financial services company is facing a total fine of around ₹850 crore — 100 per cent penalty for the alleged ₹341 crore tax evasion, ₹150 crore of interest, and ₹16 crore daily interest until payment is completed, the report added. The period for the alleged invasion is June 2022 to March 2024.
What Is The Issue?
The company charges 'upfront interest' from those who avail loans to purchase store items, which the DGGI states is a taxable 'processing fee or service charge', as per the report. Bajaj Finance has, however, categorised it as a non-taxable 'interest charge', which the authority has raised an issue with.
"The taxpayer has failed to correctly self-assess the tax payable on the upfront interest and pay the liability thereof and file the GST returns accordingly," as per the notice, the report said.
The probe was initiated by GST officials in Kerala after an inspection of the Kozhikode outlet of the 'myG' retail chain in August 2022. The notice stated that 'upfront interest' was charged regardless of the loan amount, which is how 'service charge' is usually applied, the report added.
Executives of Bajaj Finance were summoned by GST officials for details of the charges to customers, and in July, the company's office in Pune's Viman Nagar was inspected, the report added.
As per the notice, it said, 65 offices of the financial services player charged customers with this 'upfront interest'.