The Gujarat High Court has quashed a ₹43.43 crore Integrated Goods and Services Tax (IGST) demand against Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets Amul products, ruling that the disputed head-office services were required to be valued at nil under applicable GST valuation clarifications.
The case concerned common corporate expenses incurred by GCMMF’s head office in Anand between July 2017 and March 2019. These included advertising and publicity, IT infrastructure, software maintenance, legal fees, audit charges and employee salaries that also benefited the federation’s branches and depots.
The GST department argued that the expenses should have been allocated to branches holding separate GST registrations through a mechanism known as cross-charging. It treated the head office and separately registered branches as distinct persons under GST law and alleged that the failure to account for the services resulted in tax evasion.
An order issued by the Additional Commissioner of Central GST on January 1, 2025, confirmed the demand of ₹43,43,12,441, along with applicable interest and penalties under Section 74 of the Central Goods and Services Tax Act, 2017.
Court Applies GST Valuation Clarifications
The High Court examined CBIC Circular No. 199/11/2023-GST, dated July 17, 2023, and Circular No. 210/4/2024-GST, dated June 26, 2024. These clarifications address the tax treatment and valuation of services provided between offices of the same organisation.
The court noted that the head office had not issued tax invoices to the branches and depots for the services in question. Under the applicable clarification, where the recipient branch is eligible for full input tax credit and no invoice has been issued, the value of the relevant services may be treated as nil.
The bench held that the tax authorities had not properly examined the effect of these clarifications while confirming the demand. It also rejected the approach of determining the value of services merely by allocating common expenses according to branch turnover.
No Automatic Case for Fraud or Suppression
The court also found that the department had not established the foundational facts necessary to invoke the extended limitation period under Section 74, which applies to cases involving fraud, wilful misstatement or suppression of facts with intent to evade tax.
It emphasised that the mere discovery of information during an investigation does not, by itself, establish the elements required to invoke these provisions. The relevant notice and adjudication order must contain facts supporting the allegations.
The bench further noted that the disputed expenditure was recorded in the federation’s accounts and that the tax on the services, if charged, would have been available as input tax credit to eligible recipient branches. It therefore rejected the assumption that the failure to adopt cross-charging automatically demonstrated deliberate tax evasion.
The High Court consequently quashed the demand order, providing significant relief to GCMMF in the GST dispute.
Implications for Dairy Businesses
The ruling is relevant to dairy cooperatives, food processors and other businesses operating through multiple GST registrations. It highlights the importance of understanding the valuation rules applicable to shared corporate services and maintaining clear documentation of expenses and inter-unit transactions.
However, the judgment does not eliminate cross-charging obligations in every situation. Businesses must assess their registration structure, the nature of services supplied, input tax credit eligibility and the applicable GST rules and clarifications before determining their compliance requirements.
Source: Dairynews7x7 16 Oct, 2026 Read full story here
#DairyIndustry #Amul #GST #DairyCooperatives #TaxCompliance #FoodBusiness #DairyNews7x7
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