VEDANTA VS STATE GST AUTHORITIES ORISSA HC STAY ON ~₹231 CR DEMAND RELATING TO ISD PROVISION AGAINST VEDANTA

 VEDANTA VS STATE GST AUTHORITIES  

ORISSA HC STAY ON ~₹231 CR DEMAND RELATING TO ISD PROVISION AGAINST VEDANTA

THE MAIN ISSUE IN THE CASE  

 

• The Orissa High Court has stayed a GST demand of ₹231 crore against Vedanta.  

• The demand relates to ISD provisions — ISD = Input Service Distributor.  

• Vedanta is challenging the vires (i.e. constitutional validity) of these ISD provisions.  Which means arguing that the law (or its specific application) is invalid. 

WHAT IS AN Input Service Distributor (IWSD) UNDER GST ? 

• Under GST, an Input Service Distributor (IWSD) is an office of the supplier of goods or services which receives invoices for input services and distributes the credit of such services to other units of the same entity (or associated units) in proportion to their turnover (or some formula). 

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• The demand being stayed suggests the court has found at least a prima facie case that the ISD provisions (or the way this demand has been calculated) may be in question. 

CHALENGING THE CONSTITUTIONAL VALIDITY  

VEDANTA’S KEY ARGUMENTS 

Vedanta challenged the constitutional validity of Section 21, CGST Act. 

Unfair Liability: Recipients of ISD credit are punished even if they had no control over how ISD distributed it. 

Conflict in Law: Section 21 clashes with Sections 73 & 74 (recovery provisions). 

Invalid SCN: One show-cause notice for multiple financial years is illegal → backed by Karnataka HC’s Veremax Technologies ruling. 

 

WHY THIS CASE IS SIGNIFICANT ? 
 

1. Beyond Vedanta: This case Impacts all corporates using ISD mechanism. 
   1.If Section 21 is struck down or limited: 

 
2.No penalties for recipients in ISD disputes. 

 
 3.Relief for multiple industries facing huge demands. 

 Ensures fairness & consistency in GST law. 

• For other taxpayers: this stay could be a precedent — 

•  Indian companies using/distributing ISD credits may find more legal room to challenge similar demands. 

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• It raises questions about how GST law treats input service credit distribution, how ISD rules are being interpreted, and whether certain parts of them are unconstitutional or incorrectly applied 

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R V SECKAR, FCS , LLB 79047 19295 

COMPANIES FINED FOR FAILURE TO FILE E-FORM INC-20A- WITHIN 180 DAYS OF INCORPORATION

COMPANIES FINED FOR FAILURE TO FILE  E-FORM

INC-20A- WITHIN 180 DAYS OF INCORPORATION 

DAY1 ADVISORS PRIVATE LIMITED  Vs ROC, DELHI  

 

REQUIREMENT UNDER COMPANIES ACT 2013 

Every company incorporated after 2nd November 2018, having a share capital, must file Form INC-20A (Declaration of Commencement of Business) within 180 days of incorporation. 

The form INC-20 A  also confirms  the following : 

• that subscribers have paid the value of shares agreed and 

•  that the company has filed verification of its registered office. 

Section 10A(1): Company cannot commence business or borrow money unless INC-20A is filed. DAY1 ADVISORS PRIVATE LIMITED  Vs ROC, DELHI  

 

REQUIREMENT UNDER COMPANIES ACT 2013 

Every company incorporated after 2nd November 2018, having a share capital, must file Form INC-20A (Declaration of Commencement of Business) within 180 days of incorporation. 

The form INC-20 A  also confirms  the following : 

• that subscribers have paid the value of shares agreed and 

•  that the company has filed verification of its registered office. 

Section 10A(1): Company cannot commence business or borrow money unless INC-20A is filed. 

 

PENALTIES LEVIED  

• Company was levied a penalty of Rs ₹50,000. 

• Directors’ penalty: ₹1,000 per day of default (capped at ₹25,000 per director). 

KEY LEARNINGS  

Newly incorporated companies must ensure timely filing of INC-20A to avoid heavy penalties and operational restrictions. 

 

Persistent failure may even lead to strike-off under Section 248 

 

If the company is a small company, it can claim Small-company relief u/s 446B . 

 R V SECKAR FCS.LLB 79047 19295