Tech Solutions Ltd. (TSL) is a listed Indian company, based in Gujarat, operating in the EV (Electric Vehicle) and battery pack manufacturing…

Tech Solutions Ltd. (TSL) is a listed Indian company, based in Gujarat, operating in the EV (Electric Vehicle) and battery pack manufacturing segment. It has its main factory in Pune and an R & D center in Bengaluru. The company also exports batteries to Europe and Southeast Asia. Total Net worth of TSL as per the last audited Balance sheet is ₹ 100 Crore.TSL is undergoing a transformation as it had recently acquired a startup engaged in AI-powered battery diagnostics. The acquired start up is located in SEZ Gujarat and complies with all conditions to be recognised as a unit in SEZ.TSL has noticed that while revenue from EV batteries has grown 30%, the overall profitability has not improved proportionately. The CFO has presented the following data: Particulars FY 2024-25 FY 2025-26 Revenue (₹ Crore) 2,400 3,500 Operating Cost (₹ Crore) 1,700 2,900 Observations of the team appointed by the management:Production Department: To reduce per-unit cost, the production head decided to run longer batches and reduce machine changeover time. As a result, Inventory levels of slow-moving models increased.Sales Department: Focused aggressively on fast-moving compact products and secured large retail orders. However, these products were often out of stock due to low production priority.Procurement Team: Negotiated bulk deals for components specific to high-capacity appliances to avail discounts. This locked up working capital and delayed procurement of parts needed for fast-selling items.Further in Q4 of FY 2025-26, the company recorded a 70% increase in customer complaints in its electric batteries segment. The nature of complaints includes: Shorter battery life than advertised (less than 200 cycles Vs. claimed 500 cycles) Overheating during charging, especially in summer months Leakage and swelling of battery packs Delayed response from the service team and warranty claim denials The SEZ unit procures certain input services from domestic suppliers located in the non-SEZ area. During FY 2025-26, it received consulting services and software licenses from vendors outside the SEZ, who charged IGST on invoices.TSL filed a Letter of Undertaking (LUT) and made all its supplies from SEZ unit without payment of IGST. However, during departmental audit, the following issues were raised: (i) ITC was claimed on input services provided by M/s RTA & Co., where IGST was paid, but supplier did not mention "Supply to SEZ unit" on the invoice. (ii) M/s GHB Consultants, based in Gujarat, charged CGST and SGST, citing place of supply as Gujarat. (iii) TSL availed Input Tax Credit (ITC) on such services and utilized it for making exports under LUT's. (iv) Poonawala & Associates, a law firm, provided legal services for authorized operations and issued invoice without GST. TSL did not pay any RCM assuming that SEZ units are exempt. In December 2025, the company entered into collaboration with a German foundation, under which it received ₹ 60 lakh for conducting a research project on AI-powered battery diagnostics.Tech Solutions Ltd. is not registered under the Foreign Contribution Regulation Act, 2010 (FCRA), but the management believed the receipt was for a commercial purpose, and all the documentation was provided to the bank and RoC. Later, the Ministry of Home Affairs (MHA) raised an objection and served a notice for violation of FCRA provisions. The company had not sought prior permission or registration under FCRA. The company submitted a written reply explaining that the funds were used solely for research purposes and no part of it was diverted. They requested for compounding of the offence. The MHA reviewed the matter and decided to initiate penalty proceedings under FCRA, 2010 and FCRA Rules, 2011.The company receives export proceeds in convertible foreign exchange and occasionally avails export incentives from the Government. During the statutory audit, the auditor noticed that: Export proceeds for certain shipments made 9 months ago are still pending realisation. The company has received some Advance Payments received from foreign buyers in the year 2024 but no shipment has been made till date. It has fully converted ECBs into equity but no reporting to any authority has been done. As part of its strategic expansion, the company decided to acquire 60% equity in a newly formed company in Singapore, named SA Pte Ltd for a total investment of INR 500 Crore. With its primary manufacturing facility in Pune, imported battery cells and EV components for its production and export lines to Europe and Southeast Asia, incurring the following costs in FY 2025-26: (a) Cost of purchases (vendors' invoices for EV components): ₹ 5,00,00,000 (b) Trade discounts on component purchases: ₹ 10,00,000 (c) Import duties on component imports: ₹20,000 (d) Freight and insurance on component imports: ₹ 25,000 (e) Other handling costs relating to component imports: ₹ 10,000 (f) Accounting department salaries at Pune plant: ₹ 15,00,000 (g) Brokerage commission to indenting agents for arranging component imports: ₹ 30,000 (h) Sales commission payable to EV export sales agents: ₹ 15,000 (i) After-sales warranty costs on EV battery packs: ₹ 60,000 TSL prepares its annual financial statements in accordance with Ind AS. The company follows a financial year from April to March and presents quarterly interim financial reports for the periods ending 30th June, 30th September, 31st December, and 31st March.For the quarter ended 30th September 2025, TSL identified the following developments: A legal case settlement was finalized in August 2025, resulting in a gain of ₹ 50 lakh. The case had been disclosed as a contingent asset in the annual report for FY 2024-25. Inventory was written down by ₹ 30 lakh due to obsolescence identified during a quarterly review. An actuarial gain of ₹ 20 lakh arose on defined benefit plans, recognised in OCI as per Ind AS 19. Management decided to restate the comparative interim period (Q2 of previous year) due to a material error discovered in October 2024 related to overstatement of revenue by ₹25 lakh. The company adopted a new Ind AS from 1st April 2025 which requires retrospective application. TSL exported a consignment of goods to a client in Germany on February 15, 2026, on payment of IGST. The original invoice value was ₹ 50,00,000. Their contract included a clause allowing for price adjustments based on fluctuating steel prices.On March 20, 2026, the price was revised upwards. TSL issued a debit note for the differential amount of ₹ 5,00,000 and paid the additional IGST of ₹ 90,000 in their GSTR-3B for March 2026. The company has received the full payment, including the revised amount, in foreign currency.