Aurobindo Pharma Received ₹1.7 Billion GST Recovery and Penalty Order Over Input Tax Credit Dispute

Aurobindo Pharma Limited, in a regulatory filing on February 19, 2026, stated that the Additional Commissioner of Central Tax, Ranga Reddy GST Commissionerate, Hyderabad, issued orders demanding the recovery of refunds granted earlier. The company disclosed that the total disputed amount is approximately ₹1.7 billion. This figure comprises a tax demand of ₹849.2 million and an equal penalty of ₹849.2 million.

The orders, received by the company on February 18, alleged erroneous refund of accumulated Input Tax Credit (ITC) under Rule 89 of the Central Goods and Services Tax (CGST) Rules. The demand covers the period from September to December 2022 and involves four separate orders passed under the CGST Act, 2017.

According to the filing, the dispute originated from the company’s Export Oriented Unit (EOU) 3. The unit claimed a refund of accumulated ITC regarding Zero-Rated Supply of goods exported without payment of tax under a Letter of Undertaking (LUT). The GST department initially sanctioned these refunds following verification and the company's declaration that the unit did not supply exported goods to the domestic market.

The department subsequently challenged the refund sanction orders for the period from December 2021 to March 2023 before the Additional Deputy Commissioner (ADC) (Appeals), Hyderabad. The authority argued that similar products manufactured by other entities existed in the domestic market, and the sanctioning authority failed to consider their value when determining the eligible refund.

The ADC (Appeals) passed an Order-in-Appeal (OIA) in favour of the GST department in 2023. Aurobindo Pharma subsequently filed Writ Petitions against this OIA and challenged the validity of Rule 89(4)(C) of the CGST Rules in the Telangana High Court. These petitions remain pending disposal. To safeguard revenue, the department issued protective Show Cause Notices (SCNs) for September to December 2022.

Aurobindo Pharma maintained that it holds no domestic supplies of goods exported from Unit 3, with only scrap sales recorded. The manufacturer argued that even if the domestic market value is considered—without admitting similarity to the exported goods—the eligible ITC refund would not be significantly impacted. The company cited a judgment by the Karnataka High Court in the case of Tonbo Imaging India, which quashed the condition of comparing domestic value of like goods with exported goods, declaring it ultra vires the CGST Act provisions.

The department rejected these submissions and confirmed the demand with interest and penalties. Aurobindo Pharma stated it would file an appeal before the Commissioner of Central Tax (Appeals), Hyderabad. The company added that there is "no material impact" on its financials or operations resulting from these orders.