Piramal Enterprises hit with nearly $172 million tax bill for pharma deal

India's Piramal Enterprises said in an exchange filing on Friday that it had received a tax demand of 15.02 billion rupees (nearly $172 million) for the sale of its pharmaceutical business to Piramal Pharma in fiscal year 2021.

A tax office in the state of Maharashtra has asked the financial services company to pay 18% Goods and Services Tax (GST) on the deal, the latter said in the filing.

The tax bill amounts to about 15% of its revenue for the fiscal year ended March 31, 2024. Piramal Enterprises said it has solid grounds to challenge the "unjustified" demand.

The company sold its pharmaceutical business and other related units to Piramal Pharma for 44.87 billion rupees in October 2020.

Maharashtra's tax office has contended that the transfer of its pharma business to Piramal Pharma counts as an itemized sale and not a slump sale, the company said.

A slump sale, which receives more preferential tax treatment, refers to the sale of all assets and liabilities of an undertaking without values being assigned to individual assets and liabilities. Such a sale must also not hinder the business operations of the transferred entity.

An itemized sale, on the other hand, refers to assets and liabilities being sold with separate values assigned to each item.

Piramal Enterprises said it expects that the order would be set aside.