GAIL (India) Limited, the state-owned gas utility, has received an Order-in-Original (OIO) from the Additional Commissioner of CGST, Delhi South Commissionerate, demanding Goods and Services Tax (GST) on corporate guarantees issued by the company to banks on behalf of its subsidiaries and joint ventures.
The order, received on December 10 at 5:00 PM, alleges that GAIL failed to pay GST on corporate guarantees provided without consideration. The penalty imposed under the order amounts to ₹143.08 crore (₹143,08,40,592). GAIL has stated that the disclosure has been made in compliance with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Company’s Response and Regulatory Context
While GAIL has acknowledged receipt of the order, the company has not yet indicated whether it plans to challenge the demand. Corporate guarantees are often issued by parent companies to facilitate borrowing by subsidiaries or joint ventures, and the GST treatment of such guarantees has been a matter of legal and regulatory debate. Experts suggest that the final outcome could have implications for other public and private sector companies that provide similar guarantees.
Strong Quarterly Financial Performance
Despite the regulatory development, GAIL posted robust financial results for the quarter. The company’s net profit rose by 17.6% sequentially, reaching ₹2,217 crore, up from ₹1,886 crore in the previous quarter, exceeding the CNBC-TV18 poll estimate of ₹2,063 crore.
Revenue for the quarter stood at ₹35,008 crore, slightly higher than ₹34,769 crore in Q1 and above analyst expectations of ₹34,429 crore. Earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at ₹3,191 crore, marginally lower than ₹3,334 crore in the previous quarter but ahead of the Street’s estimate of ₹3,071 crore. The company’s operating margin was 9.1%, slightly down from 9.6% in Q1 but above the expected 8.2%.
Source from: https://indianmasterminds.com/news/gail-india-gst-order-corporate-guarantees-quarterly-profit-167410/
