Bajaj Auto hit with Rs 34.74 crore tax demand for spare parts misclassification

Bajaj Auto on Tuesday announced that it has received a tax demand of Rs 34.74 crore from the Uttarakhand tax authorities. The demand relates to the alleged misclassification of spare parts supplied by the company. In addition to the tax demand, a penalty of Rs 3.47 crore has also been imposed, according to a regulatory filing by the automaker, IANS reported.

Authority cites misclassification of spare parts

The order, issued by the Deputy Commissioner in Rudrapur, stated that as Bajaj Auto is a manufacturer of automobiles, the spare parts supplied by the company should be classified as auto parts. Authorities noted that these parts are customised and used exclusively in vehicle manufacturing, and therefore fall under a different tax category.

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Bajaj Auto disagrees, cites 30+ years of consistent classification

Bajaj Auto, however, rejected the tax demand, stating that it has been classifying its spare parts correctly for over thirty years. The company emphasised that its classification follows the General Rules of Interpretation.

The company said its classification is based on:

• General Rules of Interpretation (GRI)
• Relevant section notes and chapter notes
• HSN explanatory notes
• Past judicial rulings that support its interpretation

According to the automaker, the tax demand and penalty are not legally valid.

Plans to contest the tax demand

The company confirmed that it intends to contest the order through the proper legal channels, asserting that the demand is not legally valid. Bajaj Auto further stated that the order will not have any material effect on its financials, operations or other business activities.

Market reaction
Post-announcement, Bajaj Auto shares dropped 0.46 per cent to Rs 9,051 on BSE.