Hero MotoCorp Hit with ₹456 Crore GST Penalty

Hero MotoCorp received two orders from Rajasthan’s CGST authorities, the larger demand imposing a substantial penalty related to the alleged misclassification of supplied parts and accessories leading to a dispute over applicable tax rates. 

GST Demand Notices Issued to Hero MotoCorp

Hero MotoCorp has received two tax demand orders from the Additional Commissioner of Central Goods and Services Tax (CGST), Alwar, Rajasthan. These orders impose substantial penalties under Section 74 of the CGST Act, 2017.

The primary issue concerns the tax classification of certain parts and accessories supplied by the company, with authorities disputing the applicable tax rates. One order demands ₹456.06 crore in penalties along with an equivalent GST amount and interest. The second order imposes a penalty of ₹8.5 crore for after-sales parts supplied.

Dispute Over Tax Classification

Hero MotoCorp argues that it has correctly classified its products based on the General Rules of Interpretation (GRI Rules), chapter notes and HSN (Harmonized System of Nomenclature) explanatory notes. These classifications are supported by several Supreme Court judgments. 

However, the tax department has challenged this classification, asserting that different tax rates should apply. 

Company’s Response and Legal Action  

In response to these tax demands, Hero MotoCorp plans to take legal action by filing appeals with the appropriate authorities. The company is confident that it has a strong case and will follow due process to challenge the tax orders.

It believes that the demand doesn’t have a strong legal basis and expects a positive outcome through the appeals process.

Impact on Business and Financials

Despite the significant amount involved, Hero MotoCorp asserts that these tax demands will not materially impact its financial position or day-to-day operations. The company remains committed to maintaining smooth business activities while addressing legal challenges. By pursuing legal remedies, Hero MotoCorp aims to resolve the matter without affecting its overall performance.

Hero MotoCorp Share Performance 

As of February 05, 2025, at 11:10 AM, the shares of Hero MotoCorp are trading at ₹4,240 per share, up 0.068% from yesterday’s closing price. Over the last month, the stock has risen by 0.89% and over the last year, it has surged by 1.33%. The stock has a 52-week high and 52-week low of ₹6,246.25 per share and ₹3,997.50 per share respectively.

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