Piramal Enterprises Faces ₹1,502 Crore GST Demand Notice Over Pharma Sale

Piramal Enterprises Ltd (PEL) has received a tax demand of ₹1,502 crore from the Maharashtra GST Department related to the sale of its pharmaceutical business to Piramal Pharma Ltd (PPL) in the financial year 2020-21. The order, issued on February 27, 2025, includes tax, interest, and penalties.

Following the announcement, shares of Piramal Enterprises Ltd fell 2.11% to ₹854.00 as of March 3, 12:04 PM. Over the past month, the stock has declined 15.78%, while it has dropped 11.67% over the past year.

Breakdown of the Tax Demand

The tax demand is based on the department’s contention that the sale was an “itemized sale” rather than a “slump sale.” A slump sale involves transferring a business undertaking without assigning values to individual assets and liabilities, while an itemized sale involves separately valuing different components of the transaction. 

The department has applied an 18% GST on the ₹4,487 crore deal. The penalty imposed amounts to ₹83.71 crore. The demand also includes tax on proceeds from the sale of investments, which are typically outside the scope of GST.

Company’s Response

Piramal Enterprises has stated that it believes the demand is unjustified and that it has strong legal grounds to challenge the order. The company has indicated that it will take the necessary steps to contest the demand and expects the order to be set aside. 

It also stated that the tax demand will have no impact on its profit and loss statement for the year.

Financial Performance

For the quarter ending December 31, 2024, Piramal Enterprises reported a net profit of ₹38.6 crore, compared to a loss of ₹2,378 crore in the same period the previous year. However, this included a gain of ₹376 crore, without which the company would have recorded a loss of ₹337.4 crore.

Revenue for the quarter stood at ₹2,449 crore, a 1.1% decline from ₹2,476 crore in the year-ago period. EBITDA fell 10.8% to ₹1,075 crore, with margins narrowing to 43.9% from 48.7%.

Conclusion

The company plans to pursue legal remedies against the tax demand, and the outcome will determine the final financial impact of the dispute.

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