Patanjali Foods GST case closed: ₹135.29 cr dropped

What Patanjali Foods disclosed

Patanjali Foods Limited has reported a key development in a Goods and Services Tax (GST) proceeding initiated by the Office of the Assistant Commissioner (ST), Royapuram Assessment Circle, Chennai. The company said it has been informed that the demand proceedings initiated through DRC-01 have been dropped. With this, the matter has been treated as closed.

The proceeding related to alleged discrepancies in GST returns for FY 2022-23. Patanjali Foods stated that its reply to the notice was reviewed and found acceptable by the Authority. The Authority also observed that there was no short payment of tax for the period under review.

The company further confirmed that the order results in no financial impact on Patanjali Foods Limited.

Show cause notice and the amount involved

The proceedings originated from a show cause notice dated May 25, 2026. The notice was issued over alleged discrepancies in GST returns filed by Patanjali Foods for FY 2022-23 and proposed a demand, along with applicable interest.

In the company’s disclosure on the closure, the amount referenced for the demand was ₹135,29,49,106. Separately, another disclosure describing the same category of issue stated that the notice proposed a total tax demand of ₹13,52,92,49,106 along with a penalty of ₹1,35,29,24,910 and applicable interest under applicable GST laws. The company had also described the notice as being for a tax demand of about ₹1,353 crore along with penalty.

Patanjali Foods said it had adequate grounds to substantiate its position and was in the process of submitting responses in consultation with its tax advisors. Following the Authority’s review of the submissions and records, the demand proceedings have now been dropped and closed.

Why the GST department issued the notice

In describing the notice, Patanjali Foods stated that the Authority compared the company’s GSTR-3B monthly returns with corresponding GSTR-7 filed by TDS deductors. Based on this comparison, differences and anomalies in turnover were identified for FY 2022-23. The show cause notice was issued on that basis.

The company’s update indicates that, after reviewing its response and records, the Authority concluded there was no short payment of tax. This conclusion directly addressed the core allegation behind the notice.

Order passed under Tamil Nadu GST law

Patanjali Foods said an order was passed rectifying an error apparent on record under Section 161 of the Tamil Nadu Goods and Services Tax Act, 2017. The company’s communication links this rectification order to the outcome that the proposed demand was dropped.

The key practical outcome is that the proceedings initiated vide DRC-01 have been closed. Patanjali Foods has stated there is no financial impact arising from this order.

Stock in focus and recent performance context

The company’s shares were expected to be in focus on a Friday morning around the time the show cause notice became public, given the size of the proposed GST demand described in market reports and filings. Patanjali Foods shares were also reported to be down 20 per cent over the past six months.

While the company has stated there is no financial impact from the closure order, such tax proceedings often draw investor attention because they can affect cash flows and disclosures until resolved. In this case, Patanjali Foods’ update positions the matter as concluded.

Key facts at a glance

Other GST matters involving Patanjali Foods

Separately, Patanjali Foods disclosed an appeal order dated January 29, 2026 issued by the Commissioner, Central Goods and Service Taxes (Appeals), Meerut. The order rejected appeals filed by both the company and the Principal Commissioner, upholding an Order-in-Original dated January 10, 2025 passed by the ADC, Central Goods and Service Taxes, Meerut.

This matter involves a GST demand and penalty totalling ₹89.64 lakh. The company stated it does not anticipate any financial liability beyond the demand and penalty already specified, including a demand amount of ₹44,82,198 and an equivalent penalty of ₹44,82,198. Patanjali Foods also said it would take necessary action to defend its case before the appellate authority and that the matter will not impact its financial, operational, or other activities.

Delhi High Court ruling on pre-resolution GST demands

In another legal development referenced in the provided material, the Delhi High Court set aside GST demands against Patanjali Foods Limited (Ruchi Soya) for periods preceding the final approval of its insolvency resolution plan on September 4, 2019. The judgment was delivered on December 11, 2025 by a division bench of Justice Prathiba M Singh and Justice Shail Jain.

The court held that statutory dues not included in the approved resolution plan stood extinguished, and set aside the demand to the extent it related to the period prior to September 4, 2019. It granted liberty to tax authorities to issue a fresh show cause notice for periods after that date. The court further clarified that if such a notice is issued by February 15, 2026, it would be deemed within limitation, excluding the pendency of the writ petition for limitation computation.

Penalty disclosure linked to ineligible ITC

Patanjali Foods also disclosed a penalty imposed by the Office of the Commissioner of GST and Central Excise, Chennai. The issue cited was non-compliance relating to non-reversal of ineligible Input Tax Credit of Compensation Cess availed during FY 2020-21 to FY 2022-23. The penalty amount disclosed was INR 3,390,542. The company stated there was no material impact on financial or operational activities, except to the extent of the penalty amount, and that it would file an appeal before the Appellate Authority.

Why this closure matters for investors

For investors, the closure of a high-value GST proceeding reduces uncertainty around a potential tax outflow, interest, and penalties. Patanjali Foods’ statement that the Authority found no short payment of tax is central to the resolution and explains why the proceedings were dropped.

The sequence also highlights how GST notices can arise from return mismatches, such as GSTR-3B compared with GSTR-7 filed by TDS deductors. In this case, the company’s submissions and records were sufficient for the Authority to close the proceeding without a financial impact.

Conclusion

Patanjali Foods has said the GST demand proceedings initiated by the Royapuram Assessment Circle in Chennai for FY 2022-23 have been dropped and the matter has been closed under an order passed with reference to Section 161 of the Tamil Nadu GST Act. The company has reiterated that the outcome has no financial impact. Separately, the company has flagged ongoing legal and appellate processes in other GST matters, including the Meerut appeal order and the Delhi High Court’s ruling on pre-resolution plan demands.