Reliance Industries to Appeal ₹56.44 Crore GST Penalty Over ITC Interpretation

Reliance Industries to Appeal ₹56.44 Crore GST Penalty Over ITC Interpretation

Ahmedabad GST authority imposes penalty under Section 74; company disputes blocked credit classification

RIL says operations unaffected, vows to defend ITC treatment in appellate forums

By Our Legal Correspondent

New Delhi: December 02, 2025:

Mukesh Ambani-led Reliance Industries Limited (RIL) has received a penalty order worth ₹56.44 crore from the Joint Commissioner of Central GST, Ahmedabad, under Section 74 of the Central Goods and Services Tax Act, 2017. The penalty relates to the treatment of Input Tax Credit (ITC), which the authorities classified as “blocked credit.”

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Reliance has stated in its regulatory filings that it will challenge the order, arguing that the classification of services by the service provider was ignored. The company emphasized that the penalty has no impact on its operations, and the financial effect is limited to the imposed fine.

Background of the Case

The penalty order was issued on November 25, 2025, and communicated to Reliance via email. According to the order, certain ITC claimed by the company should be treated as “blocked credit” under GST rules.

Reliance disputes this interpretation, stating that the authorities overlooked the service provider’s classification of services and misapplied ITC provisions. The company intends to file an appeal before the appropriate appellate authority.

Section 74 of the CGST Act

Section 74 deals with cases where tax has not been paid or has been short paid due to fraud, wilful misstatement, or suppression of facts. Penalties under this section are severe, often involving both tax recovery and additional fines.

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In Reliance’s case, the penalty was imposed solely on the interpretation of ITC provisions, not on allegations of fraud. This distinction is crucial, as the company maintains that its claims were legitimate and based on service classifications.

Reliance’s Response

In its official statement, Reliance clarified:

• The penalty order misinterprets ITC provisions.
• The classification of services by the provider was ignored.
• The company will appeal the order and defend its position.
• The financial impact is limited to ₹56.44 crore.
• Business operations remain unaffected.

Reliance’s decision to contest the order reflects its confidence in its compliance practices and its determination to protect shareholder interests.

Wider Context: ITC Disputes in India

Disputes over Input Tax Credit are common under GST, as businesses often face challenges in interpreting rules:

• Blocked Credits: Certain expenses, such as motor vehicles, personal consumption, and employee-related benefits, are classified as blocked credits.
• Classification Issues: Misclassification of services or goods often leads to disputes between taxpayers and authorities.
• Litigation Trend: Several large companies have faced penalties over ITC claims, leading to prolonged litigation.

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Reliance’s case highlights the ongoing tension between businesses and tax authorities over ITC interpretation.

Implications of the Ruling

The penalty order has several implications:

• Legal Precedent: The outcome of Reliance’s appeal could set a precedent for ITC disputes.
• Investor Confidence: Reliance’s assurance that operations remain unaffected helps maintain investor confidence.
• Compliance Challenges: The case underscores the need for clearer GST guidelines on ITC classification.

Expert Views

Tax experts note that ITC disputes often arise from ambiguities in GST law. According to practitioners:

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• Authorities sometimes adopt restrictive interpretations of ITC provisions.
• Businesses must maintain robust documentation to defend ITC claims.
• Appeals are common, and higher forums often provide relief if claims are genuine.

Experts believe Reliance has a strong case, given its emphasis on service provider classifications.

Conclusion

The ₹56.44 crore GST penalty imposed on Reliance Industries under Section 74 of the CGST Act marks another chapter in India’s ongoing ITC disputes. While the penalty is significant, Reliance has assured stakeholders that its operations remain unaffected and that it will vigorously contest the order.

The outcome of the appeal will be closely watched, as it could influence future interpretations of ITC provisions and shape compliance practices across industries. For now, Reliance remains firm in its stance that the penalty is based on a misinterpretation of GST law.

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