Purohit Construction records Rs 69.45 lakh GST provision

Purohit Construction Limited recognised a Rs 69.45 lakh provision for its 2017-18 GST matter after the Commissioner (Appeals) rejected its appeal on June 24, 2026, replacing its earlier decision to make no provision against a Rs 4.16 crore demand. Purohit Construction has appealed to the Goods and Services Tax Appellate Tribunal (GSTAT) and made a Rs 20.84 lakh pre-deposit.

Why did Purohit Construction create a GST provision?

Purohit Construction created the Rs 69.45 lakh provision after the Commissioner (Appeals) rejected its challenge on June 24, 2026, upholding the input tax credit disallowance along with consequential interest and penalty. When it received the GST Department order during the quarter ended March 31, 2025, the company made no provision because its internal evaluation and legal advice indicated that it expected a favourable outcome.

The GST Department's order concerned financial year 2017-18 and raised a total demand of Rs 4.16 crore. This comprised Rs 2.08 crore for disallowed input tax credit, or ITC, and Rs 2.08 crore of penalty, along with applicable interest. The Rs 69.45 lakh provision is lower than the original demand and is described by Purohit Construction as its current best estimate of the liability rather than a final resolution of the case.

Purohit Construction recognised the provision in its financial results for the quarter ended June 30, 2026. It continued to report Rs 69.45 lakh as a litigation provision in its September 30, 2026 balance sheet, indicating that the accounting treatment remained in place while its challenge before GSTAT was unresolved.

What is Purohit Construction challenging before GSTAT?

Purohit Construction is challenging the Commissioner (Appeals) order before GSTAT through an appeal filed on September 29, 2026. The appeal contests the order that upheld the ITC disallowance, related interest and penalty arising from the Rs 4.16 crore demand for financial year 2017-18.

The company made an additional pre-deposit of Rs 20.84 lakh with the appeal, representing 10% of the disputed tax amount under the applicable provisions cited in the filing. Purohit Construction does not describe this pre-deposit as a final payment of the full demand or as a settlement of the dispute.

GSTAT has provisionally acknowledged the appeal, but the filing says it remains subject to scrutiny by the Registry or Bench. Purohit Construction did not disclose a hearing date, admission decision or expected disposal date, and said the ultimate outcome depends on the appellate authorities' decision.

How did the GST provision affect Purohit Construction's balance sheet?

Purohit Construction reported the Rs 69.45 lakh litigation provision under non-current liabilities at September 30, 2026. Total non-current liabilities were Rs 77.31 lakh, compared with Rs 7.86 lakh in the comparative balance-sheet column, with the new litigation provision accounting for most of the increase.

Total equity stood at Rs 52.07 lakh at September 30, 2026, compared with Rs 140.91 lakh in the comparative column. Other equity was negative Rs 388.49 lakh against negative Rs 299.65 lakh, while share capital was unchanged at Rs 440.56 lakh. The filing does not separately quantify the part of the movement in other equity attributable to the GST provision.

Current liabilities were Rs 37.76 lakh at September 30, 2026, compared with Rs 11.23 lakh in the comparative column. Total assets were Rs 167.14 lakh against Rs 160.00 lakh, showing that the litigation provision was recorded within wider balance-sheet movements rather than presented as the sole driver of changes in the period.

What did the auditor say about the GST case?

B N P S and Associates LLP included the GST matter as an emphasis of matter in its limited review report dated November 6, 2026. The auditor referred to the June 24, 2026 appellate rejection, the September 29, 2026 GSTAT appeal, the Rs 20.84 lakh pre-deposit and the Rs 69.45 lakh provision.

The auditor said its conclusion was not modified in respect of the matter. Its report explains that a limited review provides moderate assurance through enquiries and analytical procedures and is narrower than an audit; it said nothing had come to its attention indicating that the standalone results did not contain required disclosures or contained a material misstatement.

The emphasis of matter does not decide the tax case. It identifies the Rs 69.45 lakh estimate as relevant to understanding the September 30, 2026 financial statements because the final amount remains dependent on the appellate process.

Will Purohit Construction change the provision again?

Purohit Construction said it will reassess the Rs 69.45 lakh provision as the appellate proceedings develop and as other relevant information becomes available in future periods. Management said it continues to believe it has grounds on merits, but retained the provision after the June 24, 2026 adverse order instead of returning to its earlier no-provision position.

The cash-flow statement for the period ended September 30, 2026 included a Rs 69.45 lakh adjustment in calculating operating cash flow before working-capital changes. Cash generated from operations was negative Rs 26.98 lakh, compared with positive Rs 13.15 lakh in the comparative period. The filing does not attribute the full period-on-period cash-flow change to the GST matter.

Separately, Purohit Construction entered into an agreement for PEB PCL Infracon LLP on July 15, 2026. Its capital contribution was Rs 51,000, representing 51% of total capital contribution and a 51% share in the LLP's profits and losses, which is distinct from the GST litigation provision.

Conclusion

Purohit Construction's Rs 69.45 lakh provision marks a change from its earlier assessment of the 2017-18 GST dispute, when it had recognised no provision against the Rs 4.16 crore demand. The June 24, 2026 appellate rejection prompted the revised accounting treatment, while the September 30, 2026 balance sheet records the amount as a non-current litigation provision.

The next disclosed matter to watch is GSTAT's scrutiny of the appeal provisionally acknowledged after the September 29, 2026 filing. Purohit Construction has made the Rs 20.84 lakh pre-deposit and said it will reassess the provision as proceedings and other relevant information develop in future periods.