** Shares of Sapphire Foods SAPI.NS fall as much as 2.4% to 319.3 rupees apiece

** State tax authority dismisses appeal, confirms demand of 30.74 million rupees ($358,739) including tax, interest, and penalty

** SAPI, which is the India operator of KFC restaurants and Pizza Hut, says order will not have a material impact on its financial operations

** Adds it is in process of responding to demand order

** Shares down 0.7% in 2025 so far, underperforming the 5.4% rise in Nifty 500 index .NIFTY500

($1 = 85.6890 Indian rupees)

(Reporting by Bharath Rajeswaran in Bengaluru)

((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))