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onlinetaxupdate team wish to express sincere thanks to all the readers, authors, subscribers for the support extended to us.
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Dear Reader,
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Please find newsletter for your reading and reference.
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Newsletter no.105 dated 18.12.2023
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Index of the Newsletter
- Recent updates
- GST/IT in media
- Article
- Lawgics - Judgments by Ms. Nidhi Aggarwal
- GST notes by CMA Anil Sharma
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CA Saradha Hariharan presented this PPT Designed for every taxpayer and Litigator navigating GST disputes
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CA Vaishali Kharde presented this PPT on "GST Healthcare Industry Litigation Trend."
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Office of Additional Commissioner SGST, Zone II, Lucknow presented this PPT on topic "An overview of Telecom Services GST Perspective".
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Adv. Ashu Dalmia of ADA Law Chambers, prepared this PPT on topic "GST Litigation - Key issues & Case laws". It is a comprehensive guide to critical GST provisions, natural justice principles, time limits, ITC disputes, penalties, arrest, and electronic evidence —with landmark judicial pronouncements.
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Mr. S.K. Rahman, Member (Technical), GST Appellate Tribunal, Chennai Bench address audience at BCAS 20th Residential Study Course on GST held at ITC Grand Chola, Chennai on 26th, June, 2026.
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He spoke on 'Mastering GSTAT Appeals: From Defect-Free filing to Effective Advocacy - Procedural Precision, Court Craft and Best Practices from Tribunal Experience.'
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The Preventive Wing of the Central Goods and Services Tax (CGST) Commissionerate, Shimla, has uncovered an alleged GST fraud involving input tax credit of around ₹5.55 crore in the Kala Amb industrial area of Sirmaur district. The investigation has also led to the arrest of Gaurav Jain, managing director of M/s Samay Pharma India Private Limited, Trilokpur.
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How Was the Alleged GST Fraud Carried Out?
CGST officials alleged that Samay Pharma and M/s Dual Healthcare claimed input tax credit using fake invoices issued by several firms that either did not exist or were found to be non-genuine.
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The investigation found that ITC worth around ₹5.55 crore was allegedly claimed through invoices linked to 10 such firms. Officials examined the transactions to determine whether the supplies mentioned in these invoices had actually taken place.
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What Did Officials Find About the Goods?
Officials said the invoices showed the purchase of goods, but there was no evidence confirming that those goods were actually transported.
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E-way bills and toll-plaza records also did not support the movement of goods mentioned in the invoices, raising questions about whether the transactions reflected genuine supplies.
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How Were GST Refund Claims Allegedly Involved?
Officials further alleged that the fake input tax credit was later included in GST refund claims.
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The suspected credit was allegedly used in an attempt to obtain money back from the government through the GST refund mechanism.
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What Other Irregularities Were Found?
During the investigation, officials found several suspicious transactions, fake firms and invoices without actual movement of goods.
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They also alleged that shell entities were being used to manipulate the GST credit and refund system.
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What Evidence Did Investigators Examine?
The CGST team recorded statements from several people during the investigation and examined digital evidence.
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The inquiry also looked at invoices, the firms connected to them and records relating to the alleged movement of goods.
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Why Was the Managing Director Arrested?
Based on the evidence collected during the investigation, Gaurav Jain, managing director of M/s Samay Pharma India Private Limited, was arrested.
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The arrest was made under Section 69(1) of the Central Goods and Services Tax Act, 2017.
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Follow for daily updates on cybercrime, corporate fraud, DFIR, hacking, investigations, and digital forensics
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GST officers have arrested a partner of a firm engaged in trading of iron and steel goods for fraudulently availing input tax credit of over Rs 15.78 crore.
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Investigations by the Central Goods & Services Tax (CGST), Delhi South Commissionerate's anti-evasion branch revealed that the firm had availed inadmissible ITC on the basis of invoices issued by multiple firms, several of which were found to be non-existent, non-functional, suspended or cancelled.
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Field verification also established that certain suppliers had no genuine business activity at their declared places of business.
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In a statement, the Finance Ministry said, "CGST Delhi South Commissionerate have arrested a partner of the firm engaged in trading of iron and steel goods in a case involving fraudulent availment, utilisation and passing on of inadmissible ITC aggregating to over Rs 15.78 crore through bogus invoices of approximately Rs 87.67 crore."
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Further inquiry established that ITC was availed without actual receipt of goods and was also passed on to various recipients through invoices issued without corresponding supply of goods.
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Based on the evidence gathered during the investigation and statements recorded under Section 70 of the CGST Act, 2017, the accused was arrested on September 14 and produced before the Patiala House Court, which remanded him to judicial custody for 14 days.
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The September 30, 2026 deadline for filing tax audit reports for assessment year (AY) 2026-27 is fast approaching, but the government has not announced any extension so far. Several Chartered Accountant (CA) associations have sought more time, citing the workload involved in completing audits, reconciliation issues and delays in getting audit-related information and utilities.
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For taxpayers whose accounts are subject to audit, September 30 remains the applicable deadline unless the Central Board of Direct Taxes (CBDT) announces a change. Experts say taxpayers should continue working towards the existing deadline rather than wait for an extension.
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CA associations seek more time
The demand for an extension has gained momentum as professional bodies have raised concerns over the time available to complete tax audits. The Chartered Accountants Association, Jalandhar has sought an extension of the tax audit deadline to October 31, while the Punjab Accountants Association and Rajasthan Consultants Association has also made a similar representation.
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The associations have cited the delayed release of ITR forms and utilities, increased compliance requirements and the overlap between the August 31 non-audit ITR deadline and the September 30 tax audit deadline. They have argued that extending the audit deadline would provide CAs with more time for proper reconciliation and verification.
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The request comes against the backdrop of a tax audit process that requires detailed reporting and verification across several financial and tax records.
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Mohit Gupta, partner – direct & international taxation, PNAM & Co. LLP, said taxpayers and professionals should continue to work on the assumption that September 30 is the deadline unless the CBDT formally announces an extension.
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“At present, taxpayers and professionals should proceed on the basis that September 30, 2026 remains the applicable deadline unless the CBDT issues a formal extension notification,” Gupta said.
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He said the demand for additional time is not merely about getting more time to file the report. Auditors need to reconcile books of account with GST records, TDS/TCS data, AIS/TIS and other information before finalising the report.
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“The demand for additional time is therefore primarily about ensuring quality and accuracy of compliance rather than merely seeking additional time for filing,” he said.
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What are the biggest challenges?
The audit process has become increasingly data-intensive, with auditors required to examine information from multiple sources. Any mismatch between the books and tax records may need further investigation before the report can be finalised.
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Dinesh K. Jain, managing partner, Dinesh Aarjav & Associates, said the pressure is coming from several issues at the same time.
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“Three things are stacking up: a compressed working window, recurring portal issues — login failures, OTP delays, DSC errors, and glitches pulling AIS/TIS/Form 26AS data; and reconciliation friction,” Jain said.
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Taxpayers may have to reconcile turnover with GST returns, verify TDS/TCS details, check AIS and TIS entries and match bank transactions with the books. Pending information from taxpayers can further delay the process.
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Gupta said bank statements, fixed-asset details, loan schedules, related-party information, expense details and other supporting documents need to be available with the auditor before the report can be completed.
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Another factor this year is the transition to the Income-tax Act, 2025. However, the tax audit relating to FY 2025-26 and AY 2026-27 continues under the Income-tax Act, 1961.
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Will the government extend the deadline?
There is a precedent for extending the tax audit deadline. For FY 2024-25, the CBDT had extended the deadline for filing tax audit reports from September 30, 2025 to October 31, 2025.
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However, last year's extension does not mean that the government will necessarily take a similar decision this year.
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What should taxpayers do now?
With the deadline approaching, taxpayers whose accounts are subject to audit should start closing any pending gaps rather than wait for a government announcement.
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The immediate priority should be to provide CAs with all outstanding documents and complete key reconciliations. This includes GST turnover, AIS/TIS and Form 26AS, bank and loan accounts, fixed assets, statutory dues, related-party transactions and expenses that may require tax-disallowance analysis.
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Experts say taxpayers should work backwards from the deadline and ensure that their reports are not left for the final day.
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“Work backward from September 30, not toward it,” Jain said.
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Taxpayers should also remember that uploading the audit report is not the end of the process. The CA files the report electronically, after which the taxpayer has to approve it through their income-tax e-filing account.
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Therefore, taxpayers should keep sufficient time for the approval step as well.
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For now, September 30 remains the tax audit deadline for AY 2026-27. Unless the CBDT formally announces an extension, taxpayers and CAs should proceed on the basis that the existing deadline will apply.
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The Union government has moved the Supreme Court against a Punjab and Haryana High Court ruling that declared Section 147A of the Income Tax Act unconstitutional, a decision that has raised questions over the validity of reassessment proceedings conducted by jurisdictional tax officers.
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Additional Solicitor General N Venkataraman, appearing for the Centre, on Wednesday sought an urgent hearing of the Centre’s special leave petition (SLP) before Chief Justice of India Surya Kant. The CJI agreed to have the matter listed on an urgent basis.
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Seeking an early hearing, Venkataraman told the court that the High Court ruling had created a “huge vacuum” in the law and that the issue was being closely followed by taxpayers.
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The challenge concerns the statutory framework governing reassessment proceedings under Sections 148 and 148A of the Income Tax Act, particularly the respective roles of the jurisdictional assessing officer (JAO) and the National Faceless Assessment Centre (NFAC).
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The dispute gained prominence after the introduction of the faceless assessment regime. A key question before the courts was whether jurisdictional officers retained the authority to independently issue reassessment notices under Section 148 and pass orders under Section 148A, or whether such functions were required to be routed through the faceless assessment mechanism.
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The Punjab and Haryana High Court, in Income Tax Officer, Ward 2(1), Chandigarh v Tej Partap Singh, was among the courts that invalidated reassessment proceedings initiated by jurisdictional officers where the prescribed faceless procedure had not been followed. Some other High Courts, however, adopted a different interpretation of the statutory scheme.
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Against this backdrop, Parliament retrospectively introduced Section 147A with effect from April 1, 2021. The provision stipulated that references to the “Assessing Officer” in Sections 148 and 148A would mean an assessing officer other than the National Faceless Assessment Centre.
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The amendment effectively sought to preserve the jurisdiction of jurisdictional officers to undertake reassessment-related functions, notwithstanding the earlier judicial rulings concerning the faceless mechanism.
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The Punjab and Haryana High Court subsequently examined the constitutional validity of Section 147A and struck it down. The court held that legislation could not retrospectively alter the legal position merely by declaring that a position contrary to earlier judicial findings was valid.
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The High Court found that the provision attempted to overcome the effect of judicial decisions holding the earlier reassessment procedure legally defective rather than curing the underlying legal infirmity. It consequently held the retrospective legislative intervention to be impermissible.
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The Centre’s challenge before the Supreme Court will now bring the validity and effect of Section 147A into focus, including the extent to which Parliament can retrospectively alter the statutory basis of reassessment proceedings following judicial pronouncements on the issue.
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Source: Business Standard
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Tax officer imposed a 200% penalty of Rs. 4.85 lakh, but ITAT cut it to Rs. 1.21 lakh.
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You file your income tax return but end up under-reporting your income. But, the income tax department treats it as mis-reporting of income and imposes a heavy penalty on you. What happens then?
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This is the case of a 57-year old non-resident Indian (NRI) woman who ended up under-reporting her income when she filed here Income tax return, and the gap was huge.
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What the case is about
The NRI woman declared an income of Rs. 43,796/- for the assessment year 2020-21. But the Income tax department tracked an interest income of Rs. 14,46,321 that was not disclosed in here return and imposed a 200% penalty on her.
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The assessing officer treated the omission as misreporting and imposed a penalty of Rs. 4.85 lakh, equivalent to 200% of the tax payable on the under-reported income.
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The additional interest income was brought to tax during reassessment because it had not been disclosed in the original return. The tax officer classified the omission as misreporting, which attracts a penalty of 200% under Section 270A, rather than the 50% penalty applicable to ordinary under-reporting.
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The woman denied deliberately concealing income. In here appeal, she said she had consistently filed her returns on time and had never intentionally under-reported her income.
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The CIT(A) upheld the penalty, observing that interest income of Rs. 14,02,525/- had been completely omitted from the return.
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The CIT(A) found that the interest income of Rs. 14,02,525/- had been entirely left out of the return. It also noted that the taxpayer had not voluntarily disclosed the income or provided an explanation and supporting documents despite receiving several notices.
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The taxpayer then approached the Income tax Appellate Tribunal (ITAT), Mumbai, which upheld the penalty for under-reporting but reduced the applicable penalty rate from 200% to 50%.
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How did she explain the mismatch?
Her advocate said the woman was living abroad, had limited technological knowledge and had handed over her tax compliance to an accountant. She therefore remained unaware of the electronic notices issued by the department. After learning about the discrepancy, she paid the additional tax and interest.
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"She was only informed about the additional tax liability of Rs. 2,42,589/- plus interest amounting to Rs. 3,06,821/- totaling to Rs. 5,49,410, which was paid on 23.01.2025, as the said tax plus interest liability had arisen due to the accountant's mistake."
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The taxpayer argued that the case involved under-reporting rather than misreporting and that the penalty should therefore have been 50% of the tax liability, or Rs. 1,21,295/-.
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The woman maintained that she was an NRI during the relevant period and remained so until 01.04.2025. She attributed the omission to the accountant handling her tax compliance and her lack of awareness of the electronic notices.
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What did ITAT Mumbai say?
The Tribunal found that omission of income cannot automatically be classified as misreporting. It considered the taxpayer's circumstances and the fact that she paid around Rs. 5 lakh in tax and interest after becoming aware of the discrepancy.
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"In our considered view, non-compliance with electronic notices in these peculiar circumstances cannot by itself establish that the original omission of interest income represented deliberate misreporting warranting penalty at 200%," it said.
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The tribunal also stressed that the law makes a distinction between ordinary under-reporting , which attracts a 50% penalty, and under-reporting resulting from mis-reporting, which attracts 200%.
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"The higher rate cannot be applied merely because the department detected the omitted income or because the assessee did not respond to notices."
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ITAT Mumbai therefore sustained the penalty under Section 270A for under-reporting , but directed the Assessing Officer to apply the 50% rate instead of 200%.
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Anuj Dave, Practice Head (Ahmedabad & Mumbai) at Clavius Legal told ET that several circumstances taken together supported the taxpayer's case. "She was a non-resident living abroad, had entrusted her compliance to an accountant, claimed limited technological knowledge and to have been unaware of the electronic notices, and paid tax and interest of Rs. 5,49,410 on becoming aware of the liability."
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It is important to note that the Rs. 5,49,410 already paid towards tax and interst does not cancel the separate penalty liability.
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The payment of tax and interest was considered in the taxpayer's favour, but did not serve as a defence against the penalty.
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The original penalty was Rs. 4,85,178/- at the 200% rate. That rate has now been reduced to 50%, but the taxpayer will still have an additional penalty liability, Mathews said.
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What's important to note is that an addition to income during assessment or reassessment does not, by itself, establish misreporting . The Revenue must show that the facts fall within one of the specified categories.
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Similarly, failure to respond to statutory notices can be relevant, bud does not by itself prove deliberate misreporting.
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Source: The Times of India
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The Superintendent of Central GST, Mohit Pratap Singh, was caught while allegedly accepting a bribe of Rs 8 lakh through a mediator, the Lokayukta said.
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Lokayukta sleuths trapped the Central government officer while he was allegedly accepting the bribe at Kendriya Sadan in Koramangala here, according to a statement.
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According to the Lokayukta, Singh had demanded the money to "close a false complaint" filed against the complainant, Syed Zameer, in connection with pending Central GST dues. PTI GMS SSK
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Punjab’s excise and taxation officials detained 170 vehicles carrying goods suspected to be in violation of GST provisions, officials said on Monday.
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The operation, carried out jointly by all State Investigation and Preventive Units with special focus on Mandi Gobindgarh and Khanna, led to the seizure of iron scrap and finished iron/steel goods valued at more than Rs 5 crore.
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Excise and Taxation Minister Harpal Singh Cheema described the drive as “a wake-up call for those who think they can get away with it.” He emphasised that the government is determined to plug every loophole and ensure that tax compliance becomes the rule of the day rather than the exception.
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A substantial number of vehicles were found without proper invoices and prescribed documents, a clear violation of the GST law.
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Punjab will not allow tax evasion to eat into the state’s revenue. Every legitimate rupee must reach the public exchequer, for it is the lifeblood of development, Cheema said in a statement.
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The minister further informed that the detained consignments are undergoing detailed verification, which is expected to be completed within a week. PTI CHS MPL MPL
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The Telangana Commercial Taxes Department has issued detailed guidelines governing the use of Artificial Intelligence tools and other third party online platforms by its officers, making individual officers personally accountable for any unauthorised sharing of taxpayer information through such platforms.
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Circular No. 1/2026, issued by the department, allows officers to use AI for generic research, drafting and administrative efficiency, but makes it clear that such use cannot come at the cost of taxpayer confidentiality, data security or the independent application of mind by officers.
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The circular prohibits officers and staff from typing, pasting, uploading, scanning, photographing, dictating, transcribing or otherwise transmitting taxpayer related information into any public or commercial AT tool, chatbot, generative AI platform, document analyster, summariser translation or transcription service, or cloud based analytical software, unless the platform has been expressly authorised in writing by the Commissioner of Commercial Taxes or the Government of Telangana.
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CA Jitendra Patel, Partner, Indirect Tax, N.A.Shah Associates LLP, said the circular was a significant and welcome step towards the responsible use of AI by tax officers.
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"The Telangana commercial taxes department's circular No. 1/2026 is a significant and welcome step towards the responsible use of Artificial Intelligence (AI) by tax officers. While the circular encourages the use of AI for research, drafting and administrative efficiency, it rightly emphasises that taxpayers' confidentiality and the independent application of mind by officers cannot be compromised and liable to penal action," Patel said.
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Officers face personal accountability
The restrictions cover a wide range of taxpayer information, including GSTIN, PAN, legal name or trade name, address and contact particulars, bank account details, returns and annexures, financial statements, invoices, e way bill data, discrepancy reports, notices, assessment, adjudication or appellate orders, audit material, refund applications, inspection , search and investigation records, statements recorded during proceedings, and internal notes or legal opinions relating to an identifable taxpayer.
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The circular also makes clear that the responsibility for protecting such information rests with the officer concerned. Unauthorised transmission of taxpayer information to an external AI platform can therefore expose the officer to disciplinary, legal and data protection consequences.
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Ikesh Nagpal, Lead, Indirect Tax, AKM Global, said the circular strikes a balance between the use and AI and the need to protect taxpayer confidentialy.
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"The Telangana Commercial Taxes Department's circular strikes a pragmatic balance between embracing AI and safeguarding taxpayer confidentiality. Rather than prohibiting AI, it permits its responsible use while drawing a firm boundary against sharing identifiable taxpayer information on unauthorised platforms. This is particularly relevant for tax administration, where officers routinely handle highly sensitive financial and transactional data," Nagpal said.
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"More importantly, the circular reinforces that AI may assist but cannot replace the officers' independent application of mind. Every AI generated legal proposition or case citation must be independently verified, and the final order must reflect the officer's own reasoning. This approach places accountability where it belongs with the decision make while still allowing technology to improve efficiency in tax administration," he added.
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AI cannot replace tax officer's judgment
The department has also stressed that AI cannot replace the independent judgment required from officers, particularly while issuing notices, assessments, adjudication orders and other quasi judicial decisions.
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Manoj Mishra, Partner and Tax controversy Management leader, Grand Thornton Bharat, said the circular comes at a time when AI is becoming increasingly embedded in legal and tax workflows.
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"As AI becomes increasingly embedded in legal and tax workflows, the focus has rightly shifted from whether AI should be used to ensuring it is used responsibly and within the boundaries of law. Recent judicial interventions, where courts have cautioned against mechanical reliance on AI generated content and even set aside orders lacking independent application of mind, underscore that technology cannot substitute statutory decision making. Recent Telangana's Circular on AI use is therefore a timely and pragmatic intervention. It reinforces that taxpayers information remains confidential under the GST framework and the Digital Personal Data Protection Act, and that unauthorised disclosure on public AI platforms can trigger disciplinary, legal and data protection consequences. By permitting AI for generic research and drafting while mandating human verification, confidentiality safeguards and independent judgment, the circular offers and balanced governance framework that could serve as a useful precedent for tax administrations across the country , "Mishra said.
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"The circular makes one point unmistakably clear: custodianship of taxpayer data carries personal accountability. Any unauthorised disclosure through public AI platforms may expose the officer to disciplinary action, criminal and data protection consequences, while also jeopardising the validity of the underlying tax proceedings. AI may improve administrative efficiency, but responsibility for data security, legal accuracy and independent decision making cannot be delegated to an algorithm," he added.
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Public AI platforms treated as third party transmission
Aravind Srivatsan, Partner and India Tax Leader, Nangia Global, described the framework as what could be termed a first of its kind detailed code governing the use of AI tools by tax department staff.
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He said the Telangana Government has acknowledged that officers are increasingly using AI based tools to improve the speed, consistency and quality of their work, while making it clear that such use cannot compromise taxpayer confidentiality, data security of the officer's independent judgment.
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Srivatsan pointed out that large language models, generative AI platforms, chatbots, document analysers, summarisers, translators, transcription services and coding assistants may process information on private servers, frequently outside India. Information entered into such platforms may also be logged, retained , reviewed or used for model training, he said.
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According to Srivatsan , typing , pasting, uploading, scanning, photographing or dictating departmental material into an external AI platform amounts to electronic transmission of information to a third party and can create risks of data leakage, misuse and subsequent litigation.
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He said that where an officer transmits taxpayer particulars to an external AI engine without authority of law or taxpayer consent, the act can attract personal accountability.
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Disciplinary, criminal and data protection consequences
The circular provides for consequences where taxpayer information is disclosed without authorisation. These can include disciplinary action under the applicable Telangana Civil Services rules, possible criminal consequences under applicable law and data protection consequences under the Digital Personal Data Protection Act, 2023.
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The circular also addresses the potential impact on tax proceedings where AI generated material is used without proper verification. An officer remains responsible for the accuracy of statutory provisions, legal propositions and judicial precedents relied upon in an official proceeding.
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Aditya Singhania, Founder of Trackase, said the guidelines could address the unauthorised and unconscious sharing of taxpayer data through general AI applications while also establishing individual responsibility for breaches.
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He said the framework draws a clear distinction between the role of humans and machines in proceedings where tax officers exercise quasi judicial authority. He also pointed to instances where courts have taken cognisance of non existent. AI generated citations and said the Telangana framework provides detailed guidance for responsible use of AI by tax officials.
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Officers told to delete past taxpayer data
The department has also addressed information that may already have been entered into AI platforms.
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Officers and staff have been directed, to the extent technically feasible, to delete taxpayer related information previously entered into AI platforms, along with associated chat histories and stored files.
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The restrictions also extend to the use of personal mobile phones, tablets, laptops, personal email accounts and personal cloud storage for processing departmental material through AI tools.
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At the same time, the circular does not prohibit AI use altogether. Officers can use AI for generic research, drafting assistance and language related tasks, provided identifiable taxpayer information is not shared and AI generated material is independently verified before being relied upon.
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The framework effectively places a clear boundary around the use of AI in tax administration. AI can be used as an efficiency tool, but the responsibility for taxpayer confidentiality, data security, legal accuracy and independent decision making remains with the tax officer.
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Source: cfo economictimes
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The tax department is increasingly using artificial intelligence (AI), data analytics and information from multiple government databases to identify anomalies, detect potential tax risks and sharpen scrutiny of taxpayers.
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According to tax officials and chartered accountants TNIE spoke to, the approach is moving beyond checking individual tax returns to analysing patterns across Income Tax Returns, GST returns, e-invoices, e-way bills, registrations and historical taxpayer behaviour. The objective is to make scrutiny more targeted and improve voluntary compliance.
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The Income-Tax department already processes information available through systems such as the Annual Information Statement (AIS), which gives taxpayers details of financial transactions and income-related information available with the tax authorities. More sophisticated AI tools could help identify patterns across these datasets and flag cases requiring closer examination.
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Jigar Doshi, country head - Indirect Tax, Ascentium India, said the department's scrutiny and audit process was no longer limited to information submitted in a particular return.
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“Increasingly, the department is able to run data-driven simulations across multiple sources — including Income Tax Returns, GST returns, e-invoices, e-way bills, registrations and historical taxpayer behaviour — to identify anomalies and potential tax risks,” he said.
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GST audits go deeper
GST administration is also making greater use of centralised analytics to identify suspicious transactions and taxpayers. Platforms such as DGRAM are used to flag fake registrations, suspicious input tax credit (ITC) chains and potential tax-evasion patterns, while BIFA (Business Intelligence and Fraud Analytics) acts as a risk and exception-reporting engine using the all-India GST database.
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At the state level, tax administrations are also developing their own analytical capabilities. Maharashtra's Business Intelligence & Data Warehouse (BIDW), for instance, combines a data warehouse with an analytics layer to help identify cases for scrutiny and audit.
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“Manual audits and sample testing alone may not be sufficient against AI-enabled regulatory scrutiny,” says Rajat Mohan, managing partner at AMRG Associates, adding that businesses are facing greater scrutiny of historical transaction data and cross-period discrepancies.
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GST audits can involve reconciliation across GSTR-1, GSTR-3B, GSTR-2B, e-way bills and e-invoices. Automated systems can identify differences in ITC, outward supplies and turnover, as well as claims involving suppliers whose registrations were subsequently cancelled or who failed to discharge their tax liabilities.
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The scale of information available to tax authorities is significant. India had more than 1.65 crore GST taxpayers as of May 2026, generating millions of invoices and returns that can be analysed alongside income-tax information.
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This allows authorities to identify issues such as unusual refund claims, short payment of GST, excessive ITC claims and inconsistencies between sales and purchases.
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The growing ability to combine information from GST, income tax, customs and other government systems could allow tax authorities to build a wider financial profile of taxpayers.
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According to experts, this means for businesses conventional reconciliation of books with tax returns may no longer be sufficient. Companies may increasingly need to identify potential risks before they are flagged by the department.
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AI could also allow the department to alert taxpayers to potential discrepancies, seek clarification digitally and escalate cases for formal scrutiny where required.
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However, AI is likely to remain an aid rather than a substitute for human judgment. Officers would still have to verify facts and take responsibility for assessment decisions.
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“AI is an enabler,” one tax official said, stressing that the taxpayer or professional taking the final tax position would continue to be accountable. AI cannot be treated as a substitute for human judgment, particularly in complex tax matters.
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Source: The New Indian Express
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The Central Bureau of Investigation (CBI) has arrested Superintendent, Land and Building Section at office of Commissioner of CGST and Central Excise, Raigad and a CGST consultant, in a bribery case.
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The CBI registered the instant case on 09.09.2026 against the accused Superintendent and unknown others based on a complaint by the Project Head of a private realty company at New Panvel. The realty company had undertaken a redevelopment project of two Buildings at Sector 17, New Panvel. A total of 24 of these flats are owned by the CGST & Central Excise, Raigad Commissionerate for which the necessary approvals from the local authority have already been received. It was alleged in the complaint that the accused Superintendent demanded Rs. 1 Crore for the NOC and handing over of the flats for redevelopment. During the verification of the complaint, the accused officer demanded Rs. 10 Lakh in cash on 10.09.2026, Rs. 20 Lakh as downpayment of a flat purchased by the accused public servant and Rs. 70 Lakh on later stage for other officers of DG HRD CGST, New Delhi.
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The CBI laid a trap on 10.09.2026 while the accused Superintendent directed the complainant to handover Rs. 10 Lakh undue advantage to a CGST consultant, who was present there. Both the accused persons have been arrested on 10.09.2026 and were produced before the competent court on 11.09.2026 which has granted two days of police custody of both the accused persons.
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Further investigation is being undertaken.
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Two income-tax officials and two others were arrested Thursday for allegedly conducting a fake raid on a Chakala company and demanding Rs 1 crore, taking the total arrests in the case to 10. It was masterminded by a driver sacked by the company three months ago, said police.
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The two officials – I-T inspector Sureshkumar Mishra (57) posted at the Piramal Chamber office in Lalbaug, and tax assistant Sunil Gore (59) posted in the Kautilya Bhavan office in BKC – had earlier allegedly conducted a similar raid on a Manpada company and demanded Rs 65 lakh.
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In the Chakala case, the extortion was foiled by the company owner after he asked for authorisation documents for the raid.
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The raid was carried out at Two M Ophthotronics Pvt Ltd in Sahar Cargo Estate on July 17. Andheri police registered an FIR on September 4 following a complaint by company owner Rajkumar Kandasami, who sought documents for the raid. The ‘raiding’ party could not produce one and left empty-handed after 3 hours, police said. An internal inquiry and checks through his chartered accountant found that the I-T department had ordered no raid.
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Police sub-inspector Rohan Surve said two plainclothes men had approached Kandasami and his wife near their home, displayed an identity card, and forced them into an aggregator cab and took them to his office. The duo questioned employees, examined documents, and obtained Kandasami’s signature on a purported search warrant. They questioned him about cash transactions, threatened a substantial penalty, and offered to settle the purported case for Rs 1 crore.
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Senior inspector Umesh Machindar said they learnt that Kandasami’s former driver, Santosh Khopatkar (37), had provided the tip-off. Khopatkar, sacked three months earlier, wanted revenge and had allegedly sought I-T officials’ help to raid his former employer. Others arrested earlier were Vinay More (37), Prem Sabnani (50), Pragnya M, Reshma Warang (41) and Shabina Shaikh (48).
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DCP (West Zone-3) Datta Nalawade said they also took custody of Jitendra More of Thane and Ashok Shinde of Vile Parle West on Thursday. The duo was in judicial custody in the Manpada case.
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Source: The Times of India
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The tax department cannot tax rental income in the hands of individual landowners if the commercial building was constructed under a joint development agreement (JDA) and the earnings from it have already been disclosed and assessed in the hands of a genuine partnership firm, the Income Tax Appellate Tribunal (ITAT) Bangalore has recently ruled.
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The tribunal also held that withdrawals by the landowners from the firm’s bank account did not, by themselves, justify taxing the rental income in their hands.
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The ruling came in a dispute over rental income from a commercial property developed under a JDA. The income tax department treated the landowners as the actual owners of the building and apportioned the rent among them, despite the partnership firm having disclosed the rental receipts.
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In a judgment pronounced on 21 August, however, ITAT Bangalore held that the firm was a genuine legal entity and that taxing the same rental income again in the hands of the landowners would amount to double taxation.
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Why did I-T Dept tax landowners?
According to the complaint, the landowners entered into a JDA with a developer in March 2005 to develop their land. Subsequently, the landowners and the developer formed a registered partnership firm to construct Block C1 in a Special Economic Zone (SEZ).
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The JDA was executed between the owners, Lakshmamma, her son, Late Venkatesh Reddy, and five daughters, V Kothanda Reddy and his father, Late Venkataswamy Reddy, and the builder, Shyamaraju & Company (India) Pvt Ltd.
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After the building was constructed, it was rented out to several companies, with the rent being directly credited to the partnership firm's bank account.
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During a search conducted in June 2022, the tax department decided that the landowners, rather than the partnership firm, were the actual owners of the property. The assessing officer (AO) relied, among other things, on withdrawals made by owner-partners from the firm's account and on the fact that the landowners paid property tax.
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The rental income was consequently apportioned among the landowners and added to their taxable income under the head “Income from House Property," which in turn increased their tax liability.
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How did landowners win case
The landowners contended that the partnership firm was a genuine, registered legal entity, recognized by several government authorities as the co-developer of the SEZ. They maintained that the rental receipts had been recorded in the firm's books and credited to its bank accounts.
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They argued that the tax department had itself assessed the firm after accepting the rental income it had declared and therefore could not tax the same income again in its hands.
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The ITAT Bangalore agreed with this argument. It was accepted that the partnership firm was a legal entity, that its partnership deed was registered, and that the building was rented out, with the rent directly credited to the firm's bank account.
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The tribunal also found that the tax department had itself assessed the firm on the rental income. After hearing both sides and considering available evidence, the body held that the firm owned Block C1 and had correctly received and disclosed the rental income.
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It further held that withdrawals by partners from the firm's account could not, by themselves, be treated as rental income in their hands. Such withdrawals were recorded as debits to the partners' capital accounts and did not transfer ownership of the building from the firm to the partners.
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“The Ld.AR (learned authorized representative) submitted that the addition made on the assessee is not warranted since she is neither a partner in the firm nor withdrawn any amount from the firm. The Ld.AR further submitted that the withdrawals at the best could be a liability in the partners' capital account and not to be treated as income in the hands of the individuals,” the ruling said.
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Since the tribunal also noted that there was no concrete corroborative evidence establishing that the landowners were the real owners of Block C1, the landowners ultimately won the case. The tax department was asked to delete the addition of rental income in the hands of the taxpayers, and the appeals concerning the undisclosed rental income were thus allowed.
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The Hon’ble Delhi High Court in Shub Conductors LLP and Ors. v. Joint Commissioner Central Tax GST Delhi East and Ors. disposed of the writ petition challenging the adjudication order passed under Section 74 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) and held that no jurisdictional infirmity under Section 6(2)(b) of the CGST Act arises where the proceedings under the CGST Act were initiated prior in point of time to the proceedings initiated by the State GST Authorities. Accordingly, the Court relegated the Assessee to the statutory remedy of appeal under Section 107 of the CGST Act, while directing that the period spent in prosecuting the writ petition shall stand excluded while computing the period of limitation for filing the statutory appeal.
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M/s. Shub Conductors LLP and Ors. (“the Petitioners”) were subjected to a search at their premises on February 03, 2020, wherein certain goods were seized on the ground that they were found without any invoices. The said matter was adjudicated by issuance of a notice dated September 06, 2022 under Section 67(7) of the CGST Act, and the proceedings were subsequently dropped.
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Thereafter, pursuant to investigation, the Competent Authority under the CGST Act issued a Show Cause Notice dated March 22, 2023 (“the SCN”) under Section 74 of the CGST Act for the period spanning five financial years i.e., F.Y. 2017-18 to F.Y. 2021-22, alleging that the Petitioners had wrongfully availed Input Tax Credit (“ITC”) and evaded payment of tax. The Petitioners filed their reply on February 16, 2024, whereafter the Adjudicating Authority, upon consideration of the matter, passed the Order-in-Original dated January 11, 2025 (“the Impugned Order”).
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In the interregnum, the State GST (“SGST”) Authorities issued three notices dated September 25, 2023 (in respect of F.Y. 2017-18), December 05, 2023 (in respect of F.Y. 2018-19) and March 29, 2024 (in respect of F.Y. 2019-20), which culminated in orders dated December 29, 2023, January 23, 2024 and October 08, 2024 respectively.
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Aggrieved by the Impugned Order, the Petitioners filed a writ petition before the Hon’ble Delhi High Court, essentially contending that two simultaneous orders under Sections 74 and 73 of the CGST Act had been passed in respect of the same period, that the proceedings initiated by the CGST Authorities were barred by Section 6(2)(b) of the CGST Act, and that since the controversy raised a pure question of law, the writ petition ought to be entertained notwithstanding the availability of the statutory remedy. Reliance was placed on Godrej Sara Lee Ltd. v. Excise and Taxation Officer and Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate and Anr. .
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Per contra, the Revenue contended that the proceedings under the CGST Act were initiated prior in point of time, the SCN having been issued on March 22, 2023, whereas the first notice by the SGST Authorities was issued only on September 25, 2023. Moreover, the Petitioners never filed any application for stay of the proceedings before the SGST Authorities as contemplated under Section 6(2)(b) of the CGST Act.
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Whether the proceedings initiated by the CGST Authorities were barred by Section 6(2)(b) of the CGST Act, where the SCN under Section 74 of the CGST Act preceded the notices issued by the SGST Authorities, so as to warrant the exercise of writ jurisdiction in preference to the effective statutory remedy of appeal under Section 107 of the CGST Act?
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The Hon’ble Delhi High Court in W.P.(C) 4126/2025held as under:
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- Observed that, Section 6(2)(b) of the CGST Act provides that where a proper officer under the State Goods and Services Tax Act has initiated proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the CGST Act on the same subject matter.
- Noted that, the SCN under Section 74 of the CGST Act was issued on March 22, 2023, whereas the notices relied upon by the Petitioners as having been issued by the SGST Authorities came subsequently. Thus, on the chronology placed before the Court, the contention based on Section 6(2)(b) of the CGST Act does not disclose such a jurisdictional infirmity as would warrant bypassing the statutory remedy of appeal.
- Noted that, the order dated September 06, 2022 pertained to the proceedings relating to the goods seized during the search, whereas the Impugned Order dated January 11, 2025 came to be passed after investigation, issuance of the SCN under Section 74 of the CGST Act and consideration of the Petitioners’ reply. The two proceedings, therefore, cannot, merely on that basis, be treated as parallel adjudication of the same subject matter.
- Observed that, there can be no quarrel with the proposition laid down in Godrej Sara Lee (supra) – the availability of an alternative remedy does not render a writ petition not maintainable; however, its entertainability remains a matter of judicial discretion.
- Held that, on examination of the jurisdictional objection raised under Section 6(2)(b) of the CGST Act, no such infirmity was found in the impugned proceedings and, therefore, no circumstance was made out warranting the exercise of writ jurisdiction in preference to the effective statutory remedy of appeal available to the Petitioners.
- Directed that, the writ petition is disposed of and the Petitioners are relegated to the statutory remedy of appeal under Section 107 of the CGST Act, and the period spent by the Petitioners in prosecuting the writ petition shall stand excluded while computing the period of limitation for filing the statutory appeal.
Section 6 of the CGST Act governs “Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances” and embodies the scheme of cross-empowerment under GST. Section 6(2)(b) of the CGST Act reads as under:
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“(2) Subject to the conditions specified in the notification issued under sub-section (1),––
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(b) where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.”
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A plain reading of the provision makes it clear that the statutory bar operates only where the State authorities have already initiated proceedings on a subject matter and the Central authorities thereafter seek to initiate proceedings on the same subject matter (and vice-versa under the mirror provision in the SGST Acts). The bar is, therefore, essentially chronological in operation – the authority which is first in point of time to initiate proceedings retains jurisdiction, and the subsequent initiation by the counterpart administration on the same subject matter alone is proscribed. In the present case, since the Section 74 SCN issued by the CGST Authorities on March 22, 2023 preceded the first SGST notice dated September 25, 2023, the Hon’ble Delhi High Court rightly held that the CGST proceedings suffered from no jurisdictional infirmity. Notably, if at all, it is the subsequent SGST notices and orders which may be vulnerable to challenge on the anvil of Section 6(2)(b), subject to satisfaction of the “same subject matter” test.
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The law on this issue now stands authoritatively settled by the Hon’ble Supreme Court in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate and Anr. , which was also relied upon by the Petitioners, and a detailed discussion whereof is warranted.
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In Armour Security, the State GST authority had issued an SCN dated November 18, 2024 under Section 73 of the CGST Act for the tax period April 2020 to March 2021, raising a demand of INR 1,24,92,162/- on grounds including non-reconciliation of turnover with e-way bill data and excess availment of ITC. Subsequently, on January 16, 2025, the Central GST authorities conducted a search under Section 67(2) of the CGST Act at the assessee’s premises, seized electronic gadgets and documents, and issued summons under Section 70 of the CGST Act to the directors of the company. The assessee challenged the summons contending that, since the State authority had already initiated proceedings on the same issue, the Central authority was denuded of jurisdiction by virtue of Section 6(2)(b) of the CGST Act. The Hon’ble Supreme Court, while dismissing the challenge, laid down the following seminal propositions:
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- Summons is not “initiation of proceedings”: The issuance of summons under Section 70 of the CGST Act does not constitute “initiation of proceedings” within the meaning of Section 6(2)(b). A summons is merely a step in an inquiry or investigation to gather information, documents or statements, and not the culmination thereof. The expressions “inquiry” under Section 70 and “proceedings” under Section 6(2)(b) cannot be conflated.
- SCN marks the commencement of proceedings: “Initiation of any proceedings” refers to the formal commencement of adjudicatory proceedings through the issuance of a show cause notice under Sections 73, 74 or analogous provisions. The SCN is a mandatory precondition for raising any demand, sets the law in motion qua the liability, and marks the commencement of quasi-judicial adjudication. Until an SCN is issued, the Department retains the discretion not to initiate proceedings at all. A search under Section 67(2), or an inquiry, does not by itself amount to initiation of proceedings.
- Meaning of “same subject matter”: The expression “subject matter” is intrinsically tied to the specific tax liability or contravention articulated in the SCN, i.e., the alleged offence or non-compliance together with the demand or relief sought by the Revenue. The bar under Section 6(2)(b) is attracted only where both proceedings seek to assess or recover an identical or overlapping liability. The Court laid down a twofold test – (i) an authority has already proceeded against the assessee on an identical liability of tax or alleged offence on the same facts; and (ii) the demand or relief sought is identical. Distinct infractions, even if yielding a similar tax liability, do not constitute the “same subject matter”.
- Single interface and cross-empowerment: The GST framework harmonises the concept of a “single interface” (a taxpayer is administratively assigned to one tax administration) with “cross-empowerment” (both Central and State administrations are empowered to undertake intelligence-based enforcement action across the entire value chain, irrespective of administrative assignment). Referring to the Circular dated October 05, 2018, the Court affirmed that the authority which initiates intelligence-based enforcement action is empowered to complete the entire process of investigation, issuance of SCN, adjudication and recovery, and once such action is initiated by one administration, the other must refrain from initiating parallel proceedings on the same subject matter.
- Binding guidelines: The Court further issued binding guidelines, inter alia, that an assessee must comply with summons since their mere issuance does not indicate initiation of proceedings; where the assessee is aware of an overlap in inquiry or investigation by the two administrations, it must forthwith inform the authority which initiated the subsequent action in writing; upon such intimation, the authorities shall communicate with each other to verify the claim; any SCN issued for a liability already covered by an existing SCN shall be quashed; the authorities shall decide inter-se which of them shall continue the inquiry or investigation (the taxpayer having no right to choose), and in the absence of consensus, the authority which first initiated the inquiry or investigation shall continue with it; and where the guidelines are not complied with, the taxpayer may invoke the writ jurisdiction under Article 226 of the Constitution of India. The Court also urged the development of a robust mechanism for seamless, real-time data and intelligence sharing between the Central and State administrations.
The present ruling of the Hon’ble Delhi High Court is a faithful application of the Armour Security framework. Tested on the chronological anvil, the CGST proceedings (SCN dated March 22, 2023) were first in point of time, and hence, the bar under Section 6(2)(b) was simply not attracted qua them. Equally, applying the “subject matter” test, the Court rightly distinguished the earlier Section 67(7) proceedings arising out of the seizure of goods (which stood dropped) from the subsequent Section 74 adjudication founded upon investigation into wrongful availment of ITC, holding that the two could not be treated as parallel adjudication of the same subject matter.
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In pari materia, the Hon’ble Supreme Court in Armour Security concurred with the view taken by the Hon’ble Allahabad High Court in G.K. Trading Company v. Union of India and the Hon’ble Kerala High Court in K.T. Saidalavi v. State Tax Officer, wherein it was held that an “inquiry” under Section 70 is not synonymous with “proceedings” under Section 6(2)(b) of the CGST Act. Further, the Hon’ble Jharkhand High Court in Vivek Narsaria v. State of Jharkhand held that Section 6(2)(b) is principally concerned with a chain of proceedings on the same subject matter, and where multiple wings had initiated action against the taxpayer, directed that the authority which had first initiated the proceedings shall alone continue therewith. On the maintainability front, the Hon’ble Supreme Court in Godrej Sara Lee Ltd. v. Excise and Taxation Officer clarified that the availability of an alternative remedy does not render a writ petition not maintainable, though its entertainability remains within the realm of judicial discretion – a distinction expressly noticed and applied by the Hon’ble Delhi High Court in the present case.
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The takeaway for the trade and industry is clear – the point of initiation of proceedings for the purposes of Section 6(2)(b) of the CGST Act is the issuance of the SCN, and the authority which is first in point of time retains jurisdiction to carry the proceedings to their logical conclusion. Where a taxpayer is confronted with dual proceedings by the Central and State administrations, it must promptly intimate the authority which initiated the subsequent action in writing, place on record the overlap of the subject matter, and seek quashing or transfer of the later proceedings in terms of the Armour Security guidelines. Grievances against the later, overlapping proceedings must be raised against those proceedings, and not employed to bypass the statutory appellate remedy against an order passed by the authority which was first in time.
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The Hon’ble Delhi High Court in Puneet Batra dismissed the writ petition filed by an Advocate challenging the search conducted under Section 67(2) of the CGST Act at the his premises,including his own cabin, and the consequential seizure of his CPU and documents, and held that once the premises stood validly authorised to be searched on recorded reasons to believe, the search cannot be declared unauthorised merely because one cabin therein was used by an Advocate, and that advocate-client privilege, which is a privilege of the client and not of the Advocate, cannot operate as an absolute bar against investigation into the Advocate’s own conduct where the Department has placed prima facie material indicating that he may have acted beyond the role of a legal adviser and been involved in the affairs under investigation.
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Mr. Puneet Batra (“the Petitioner”), an Advocate, practises from the office of M/s Bass Legal LLP (“Bass Legal”), a tax consulting firm constituted by his father, comprising a staff hall and two cabins, one used by the Petitioner’s father and the other by the Petitioner. M/s Matkarma Technology Pvt. Ltd. (“MTPL”), an online gaming company, engaged the Petitioner from June 2023 for GST, ROC, Income Tax, TDS, IPR and cyber-crime related work. According to the Petitioner, from October 2023 onwards MTPL took over its own compliances and he only extended legal assistance as and when required.
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On September 04 and 05, 2024, the Anti-Evasion Branch, CGST Delhi East (“the Respondent”) searched the registered premises of MTPL, where the Petitioner acted as an authorised representative. On September 06, 2024, the Petitioner withdrew his vakalatnama citing non-responsiveness of MTPL. Thereafter, summons dated September 22, 2024, October 01, 2024, June 10, 2025 and June 19, 2025 were issued to him; he filed replies invoking professional privilege and ultimately appeared on June 27, 2025 and furnished his statement.
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On July 25, 2025, pursuant to an authorisation dated July 24, 2025 issued by the Additional Commissioner, Anti-Evasion, CGST Delhi East under Section 67(2) of the CGST Act, the Respondent searched the premises of Bass Legal in the absence of the Petitioner. Loose documents relating to MTPL, the LLP Agreement and the supplementary agreement of Bass Legal were resumed, and the CPU (1250 GB) installed in the Petitioner’s cabin was seized under GST INS-02, as recorded in the panchnama dated July 25, 2025. A summons for appearance on July 28, 2025 was also served. The Petitioner alleged that the officers compelled his father to disclose the password and accessed a computer containing privileged material of MTPL as well as of his other clients.
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The Petitioner approached the Hon’ble High Court, which, by interim orders dated July 28, 2025, September 09, 2025 and November 13, 2025, directed that the CPU shall not be opened without the presence of the Petitioner, called upon the Respondent to place prima facie material regarding the Petitioner’s personal involvement in a sealed cover, and prescribed detailed safeguards under which the CPU was cloned and examined in the presence of two Local Commissioners (IT officials of the Delhi High Court), counsel for the Petitioner and officers of the Respondent, with parsing at the DGGI-NFSU (MHA) Lab. The Local Commissioners recorded that the Petitioner declined to release even admitted MTPL e-mails citing privilege, and the disputed files were segregated in a folder titled “Dispute”. The Petitioner also admitted that certain files were deleted from a remote location while the search was underway, and declined the Court’s offer at the rebuttal stage to identify the files of his other clients so that they could be excluded.
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The Petitioner contended that (i) production of material in a sealed cover was impermissible in view of Madhyamam Broadcasting Ltd. v. Union of India & Ors. ; (ii) there was no authorisation to enter the premises of an Advocate and the material was protected by advocate-client privilege; (iii) no Show Cause Notice (“the SCN”) had been issued to MTPL; (iv) the Respondent had changed its stand, having earlier described one Mr. Suraj Kumar as the mastermind in the remand applications; (v) the procedure prescribed under Instruction No. 02/2022 dated August 17, 2022, the Master Circular on SCN, Adjudication and Recovery dated March 10, 2017 and Clause 16.24 of the CBI Manual, 2020 on seizure of digital evidence had not been followed; and (vi) no reasons to believe were recorded, and the Board Resolution of MTPL dated September 29, 2025 waiving privilege was subsequent to the search and could not validate it.
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The Respondent contended that MTPL was one of several Indian entities created to route deposits of Indian users to offshore gambling websites such as winner11.com, having received approximately Rs. 1,306 crores on which GST at 28% aggregating to Rs. 365.68 crores was payable; that statements of employees and directors of MTPL disclosed that the Petitioner was deeply embedded in and instrumental in controlling its affairs and allegedly received 0.7% of every rupee deposited; that he had access to the website and to MTPL’s bank account, generated invoices without supply, visited Hong Kong to meet the management of the website, threatened witnesses and remotely deleted data during the search; that the Petitioner’s cabin formed an integral part of the authorised premises; that privilege does not extend to a participant in crime merely because he is a lawyer; and that Section 132 of the Bharatiya Sakshya Adhiniyam, 2023 (“the BSA”) itself contemplates waiver, which had occurred by the Board Resolution.
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- Whether the search conducted on July 25, 2025 at the premises of Bass Legal, including the cabin used by the Petitioner, and the consequential seizure of the CPU and documents, can be held to be unauthorised or illegal on the ground that the Petitioner is an Advocate and the material seized may contain communications protected by advocate-client privilege?
- Whether the production of investigative material before the Court in a sealed cover, without furnishing copies to the Petitioner, is impermissible?
- Whether the absence of an SCN against MTPL affects the legality of the search or the summons issued to the Petitioner?
- Whether the subsequent attribution of an active role to the Petitioner amounts to a change of stand by the Respondent vitiating the proceedings?
- Whether alleged non-compliance with Instruction No. 02/2022, the Master Circular dated March 10, 2017 and Clause 16.24 of the CBI Manual, 2020 renders the search void ab initio?
- Whether the authorisation for search was issued after recording the requisite reasons to believe under Section 67(2) of the CGST Act?
The Hon’ble Delhi High Court in W.P.(C) 11021/2025 held as under:
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- Observed that, the premises searched were those of Bass Legal and the authorisation was for search of the said premises; the photographs and the Petitioner’s own letterhead established that his cabin is inside and part and parcel of the office of Bass Legal. On examining the reasons to believe recorded by the competent authority, the Court was satisfied that they disclosed a sufficient basis for authorising the search under Section 67(2) of the CGST Act, the satisfaction required at that stage not being a finding of guilt. Once the premises were validly authorised to be searched, the fact that one cabin therein was used by an Advocate would not, by itself, render the search of that cabin unauthorised.
- Observed that, advocate-client privilege attaches to the nature of the communication and the circumstances in which it came into existence, and does not follow merely because material is found in the office or possession of an Advocate; material relating to the independent affairs, transactions or activities of the Advocate himself cannot, merely by reason of its location, be placed beyond the reach of a lawful investigation. The privilege under Section 132 of the BSA is conferred for the protection of the client and is not a personal privilege of the Advocate, the Advocate’s obligation of confidentiality being only a consequence thereof.
- Noted that, the Respondent had placed statements of various persons and material concerning the alleged financial benefit received by the Petitioner, his access to the affairs of MTPL and the admitted remote deletion of data during the search. Such material was considered only for the limited purpose of deciding whether the investigation could be interdicted altogether on the ground of privilege, and not as establishing guilt or liability; the fact of deletion, by itself, establishes no wrongdoing but is a circumstance the Respondent is entitled to examine.
- Noted that, the sealed cover comprised investigative material, including statements of persons examined, placed only to enable the Court to examine the basis of the investigation. Applying the principle underlying Section 192(5) of the Bharatiya Nagarik Suraksha Sanhita, 2023 and Section 130 of the BSA, and the decisions in Balakram v. State of Uttarakhand & Ors. and Sidharth v. State of Bihar , disclosure of investigative material during pendency of investigation cannot be directed as a matter of course; Madhyamam Broadcasting Ltd. (supra) was rendered in a different context and does not apply. Copies of the sealed cover material were accordingly not to be furnished at this stage.
- Held that, the absence of an SCN cannot render the search or summons illegal, as issuance of an SCN is a subsequent stage following investigation; there is no inconsistency in the Respondent’s stand merely because the investigation, which is not static, subsequently brought forth material concerning the role of another person; and administrative instructions, the Master Circular and the CBI Manual may regulate the manner of exercise of the statutory power of search but cannot curtail or extinguish it, so that a procedural deviation, absent a demonstrated violation of a mandatory statutory requirement affecting the authorisation or jurisdiction, would not render the search void ab initio. The objection of no personal hearing before seizure was likewise rejected.
- Held that, the Board Resolution of MTPL dated September 29, 2025, by which the client expressly consented to handover of all its material including e-mail exchanges to the CGST authorities, cannot retrospectively validate the search but is relevant to record that, as on date, the client itself has consented to production of its material, which materially differs from a situation where an Advocate resists disclosure for want of client consent. Such consent, however, neither dispenses with the confidentiality owed to other clients nor authorises examination of unrelated third-party client data.
- Held that, the search of the premises of Bass Legal, including the Petitioner’s cabin, was carried out pursuant to a valid authorisation under Section 67(2) of the CGST Act and cannot be held to be unauthorised merely because the Petitioner is an Advocate; privilege cannot operate as an absolute bar against an investigation into the conduct of the Advocate himself where prima facie material indicates that he may have acted beyond the role of a legal adviser. The Writ Petition was accordingly dismissed and the pending applications closed, with the interim orders vacated save the safeguards concerning examination and use of the seized data.
- Directed that, the Respondent shall, for further investigation, use only the cloned copy of the data prepared under the orders of the Court, shall confine its examination to material relevant to the investigation, and shall not open, access or examine the data of any other client of the Petitioner unrelated to MTPL, without prejudice to its liberty to seek appropriate orders should material of any other client become relevant. It was clarified that the judgment lays down no general proposition diluting advocate-client privilege or permitting unrestricted search of an Advocate’s premises, the conclusion being confined to the peculiar facts where the Advocate’s own role and conduct formed the subject matter of investigation. The prayer for stay of operation of the judgment for one week was declined.
Section 67(2) of the CGST Act empowers the proper officer, not below the rank of Joint Commissioner, who has reasons to believe that any goods liable to confiscation or any documents, books or things useful for or relevant to any proceedings are secreted in any place, to authorise in writing any officer to search and seize such goods, documents, books or things. The provision contains no carve-out for the premises of an Advocate or a professional; the only jurisdictional preconditions are the rank of the authorising officer and the existence of recorded reasons to believe. The Hon’ble Delhi High Court has, consistent with its earlier line of decisions on Section 67, confined its review to whether material existed on which the satisfaction could have been reached, and declined to test the sufficiency of that material as an appellate authority would. The judgment also reiterates the settled position that CBIC Instructions (including Instruction No. 02/2022-23 dated August 17, 2022 on issuance of summons and Instruction No. 01/2020-21 dated February 02, 2021 on conduct of search) and the Master Circular No. 1053/02/2017-CX dated March 10, 2017 are directory guidance on the manner of exercise of statutory power; their breach may attract departmental consequences but does not, by itself, invalidate a search backed by a valid authorisation.
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Section 132 of the BSA (corresponding to Section 126 of the Indian Evidence Act, 1872) prohibits an Advocate from disclosing, without the express consent of his client, any communication made to him in the course and for the purpose of his engagement, the contents of any document with which he became acquainted in such course, or any advice given. The two provisos carve out (i) communications made in furtherance of any illegal purpose and (ii) any fact observed by the Advocate in the course of his engagement showing that a crime or fraud has been committed since the commencement of the engagement. The Court’s reasoning that the privilege belongs to the client, that it attaches to the character of the communication and not to the physical location of the material, and that it cannot immunise the Advocate’s own commercial dealings, is a faithful application of this scheme. Notably, the Court did not rest its conclusion on the “crime-fraud” proviso as a finding of fact; it proceeded on the narrower footing that prima facie material justified investigation into the Advocate’s own role, leaving admissibility and probative value to be determined at the appropriate stage.
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The decision must be read together with the ruling of the Hon’ble Supreme Court in In Re: Summoning Advocates who give legal opinion or represent parties during investigation of cases and related issues , which the Hon’ble High Court had itself flagged for consideration in its order dated November 13, 2025. The Hon’ble Supreme Court held that Sections 132 to 134 of the BSA confer an immunity on both the client and the Advocate, that an investigating officer cannot summon an Advocate merely for having represented or advised a client, that summons may issue only where the case falls within the statutory exceptions and with prior written approval of a superior officer amenable to judicial review, and that a client’s own documents lying with the Advocate are not themselves privileged, though objections to their production are to be decided by the Court and not by the investigating officer. The present judgment is not in conflict with that ruling; rather, it occupies the space expressly reserved by the Hon’ble Supreme Court for the “occasional black sheep”, where the allegation is not that the Advocate advised or represented the client but that he was a participant in and beneficiary of the transactions under scrutiny. Equally, the detailed protocol adopted by the Hon’ble High Court for the CPU (examination only in the presence of the Advocate and Court-appointed Local Commissioners, cloning with hash-value certification, identification of client-specific files and segregation of disputed material) operationalises the Hon’ble Supreme Court’s insistence that access to an Advocate’s digital devices must be Court-supervised and confined to the matter under investigation.
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On the sealed-cover question, the Hon’ble Supreme Court in Madhyamam Broadcasting Ltd. v. Union of India & Ors. had deprecated routine reliance on sealed-cover material in adjudicatory proceedings as offending natural justice and prescribed a structured proportionality enquiry before public interest immunity is claimed. The Hon’ble Delhi High Court distinguished that decision on the ground that the material here comprised the record of a live investigation, examined only to test whether a basis for the investigation existed and not for any adjudication of liability, and drew support from the case-diary jurisprudence in Balakram (supra) and Sidharth (supra). Taxpayers facing similar situations should note the consequence: where the challenge is to the very initiation of an investigation, the Court may examine the Department’s file and witness statements without sharing them, and the assessee’s remedy lies in demonstrating the absence of jurisdictional facts rather than in contesting the credibility of the withheld material. Where, however, the sealed-cover material is sought to be used to fasten liability at the adjudication or appellate stage, Madhyamam Broadcasting Ltd. (supra) would continue to govern and copies would have to be furnished.
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Two aspects of the judgment merit particular attention from a practitioner’s standpoint.
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First, the Court expressly declined to lay down any general proposition that an Advocate’s office may be searched or his devices opened as a matter of course; the caution issued in the order dated September 09, 2025, that an Advocate’s computer ought not to be opened without his presence save in exceptional circumstances and subject to Court orders, survives the dismissal of the petition.
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Second, the Court treated the Petitioner’s admitted remote deletion of files during the search and his refusal to identify and segregate third-party client data as circumstances which weighed against him. Professionals whose premises are searched would therefore be well advised to insist on presence during any access to electronic devices, to seek immediate cloning and hash certification, to cooperate in identification of the material of the client under investigation, and to preserve rather than remove data, since the protection of privilege for genuine client communications is strengthened, not weakened, by such conduct. The Board Resolution of the client waiving confidentiality, though held incapable of validating the search retrospectively, illustrates that once the client itself consents, the Advocate has no independent standing to withhold that client’s material.
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Given that the Hon’ble High Court declined to stay the operation of its judgment, the matter is likely to travel to the Hon’ble Supreme Court, and the interplay between Section 67 of the CGST Act and the immunity recognised in In Re: Summoning Advocates (supra) in the context of searches, as distinct from summons, may receive authoritative consideration.
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Until then, the position emerging from this judgment is that the status of an Advocate neither immunises the premises from a validly authorised search nor places beyond investigation the Advocate’s own role in the affairs of a client, while genuinely privileged communications and the data of unconnected clients continue to enjoy protection through Court-supervised safeguards.
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Cost should be debited to the branch incurring that expense. It should not be debited to some other branch. Lets see an example.
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Cost debited to branch
An employee from Head office at Mumbai visits the branch office at Kolkatta. He stays there in a hotel. He gets bill for stay charges and food and beverages. After his official tour he comes back to head office and claims reimbursement.
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Since two states are involved system requires IGST to be accounted but because of place of supply rule the hotel had charged CGST+SGST. ITC is denied. ITC is populated in Mumbai 2B under ineligible column. The same is furnished in table 4(D)(2) of GSTR-3B.
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As a recourse, the employee can give GST number of the Kolkatta branch, so that the ITC gets populated into Kolkata's 2B and that branch can claim ITC. ITC on hotel stay portion only. Food and beverages are anyway not claimable.
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But the Kolkata branch cannot keep that expense in its cost center because that expense pertains to an employee visited from head office. So, he transfers that cost to HO by passing a journal entry. Now, only ITC component is there in Kolkata branch. The cost transfer is done to ascertain profitability of each branch.
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From Income tax point of view it is ok because the computation of income tax payable is calculated at consolidated level. But in GST such cost transfer may be construed as a supply of service and may attract GST.
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Balancing both i.e. GST requirement and matching principle the Company should allow to stay the hotel expense in Kolkata books (in this example), so that the ITC claim becomes easy.
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Conference expense and ITC
Similar to the example given above, the conference is also hit by the place of supply rule and ITC is denied. Conference is held for business meeting, celebrating achievement, setting new business targets etc. In this conference employees from various branches are invited. A total expense is then allocated to respective branch. The ITC is denied because of place of supply rule of immovable property.
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As a recourse, the Company can request the hotel to issue one single invoice as 'Event management service' wherein the hotel can charge IGST. Entire GST becomes eligible. Then the cost allocated to other branches should be invoiced by the Company as Cross charge and levy IGST. The receiving branch will get the ITC. There is no ITC loss in this method.
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ITC on Accomodation
Company gives accommodation facility to its employee. The company pays rent and incurs maintenance cost for the house to facilitate the employee stay conveniently. Whether ITC is eligible on the rental paid by the company and on the maintenance cost.
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It is hit by personal consumption u/s 17(5) of CGST Act. ITC is not eligible.
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An argument that the employee works for the company and hence the rental and maintenance cost is incurred in the course and furtherance of the business. ITC should be eligible.
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ITC on guest house
Unlike the accommodation where there is an element of personal consumption, the guest house is purely for the employee coming in from other branches of the Company. There is no family staying in. It is only for the official visit and stay. Hence, ITC is eligible on guest house rent and maintenance cost.
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ITC on food and beverages
ITC on food and beverages is not claimable as per section 17(5) of CGST Act. However, if the law requires the office/ factory to provide food and beverages to its employee then the ITC is eligible.
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The proviso to section 17(5) is reproduced below -
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Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.]
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As per the Factories Act, 1948 , a factory must provide and maintain an adequate canteen if it ordinarily employs more than 250 workers and is specified by a State Government notification.
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The document to claim ITC on RCM is Self Invoice and not the invoice issued by the vendor. Self invoice is raised in the month of payment of GST under RCM. And the timeline for taking credit begins from the date of self invoice.
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If the vendor invoice is dated March 2026 but the RCM at that expense is paid in September 2026 then the self invoice would be raised in September 2026 after making GST payment and ITC time limit would be counted from September 2026.
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The above has been clarified by the CBIC vide Press release dated 03.07.2019.
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The condition of payment to the vendor within 180 days is not applicable to RCM as the tax is paid by the recipient himself.
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Payment to Air transporter, bus service provider through as an agent
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I am taking this point again to touch upon the payment condition of 180 days to the Indigo , Akasa, Spicejet, Red bus , the actual service provider. Normally the agent Thomas Cook or other local agents book tickets for the passenger. They raise their invoice for service rendered. And another invoice is raised to claim the reimbursement of ticket cost. Now the provision u/s 16(2) of CGST Act requires a recipient to make payment to service provider within180 days. This condition is not fulfilled as the payment is not made to airlines or bus operators. The payment is in fact made to Thomas Cook. And they pay to the airline.
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Also, there is no ledger or account in the books of the recipient for Indigo, Akasa or Red bus.
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In this case, a correlation of payment made on reimbursement invoice to Thomas Cook needs to be done with the airline ticket invoice details given as a support to that reimbursement invoice. Also, the airline invoices populate in GSTR 2B. The same can also be compared with invoice listings given by agents to match and claim the credit.
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ISD credit is populated in table 4(A)(3) of GSTR 3B of the recipient on the filing of GSTR 6 by the Input Service Distributor (ISD).
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The credit so distributed is supported by an invoice issued by ISD. The ISD is an office of the same company in a different state or in the same state. It may be a Head office or branch office which receive common services I.e. services received for all the branches including the same branch. Classic example is Tax audit, GST audit services.
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The credit allocation to respective branches is done on the basis of turnover. It may be the previous month or the previous year. Previous year turnover is generally considered for allocation as the financials are audited.
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The recipient of the ISD credit need not go into the working of ISD distribution. It may rely upon the ISD invoice for taking ITC. The responsibility of correct allocation lies on the ISD.
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The timeline to claim credit on the ISD invoice does not hit by section 16(4). This is because the credit is first claimed by ISD following the condition prescribed in section 16 and distribution is a subsequent activity of just distributing the credit.
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The basis for claiming ITC on import of goods is the 'Bill of Entry ' (BOE). This document prepared by the importer is verified by the customs officer and the basis of the same customs duty is paid.
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The Customs portal (ICEGATE) automatically transmits the BOE details to the GST Portal , more specific to table 4(A)(1) of 3B.
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The timeline of section 16(4) does not apply to BOE ITC. But there is another view that BOE is equivalent to Invoice and therefore the timeline of section 16 (4) applies to BOE as well.
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BOE ITC also appears in GSTR 2B. There are notices when the importer claims ITC basis BOE copy when the details are not populated into 2B. On submission of BOE copy officers do accept the same and waive off the notice.
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However, to pull the details to 2B from icegate you may go to Services > User Services > Search BoE.
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Office rent or godown rent is generally paid on the basis of an agreement. The owner does not raise a monthly invoice. However, he files GSTR 1 regularly. The details also populate into 2B of the recipient. Whether the absence of invoice fulfils the condition of section 16(2)(a) of CGST Act? The answer is No.
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An education to the owner is required on the importance of actually issuing an invoice. Till then the ITC can be taken on the basis of 2B.
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The Hon’ble Supreme Court in GVK Jaipur Expressway Pvt. Ltd. v. Deputy Commissioner of State Tax & Ors. issued notice in the Special Leave Petition filed by the Assessee challenging the judgment of the Hon’ble Rajasthan High Court, which had dismissed its writ petition against a total GST demand of Rs. 14,06,54,640/-, wherein the Assessee contended that neither the Show Cause Notice (“SCN”) nor the adjudication order was duly served upon it and that the service was allegedly effected by merely uploading the same on the GST Common Portal. Taking note of the submission that the Hon’ble Madras High Court and the Hon’ble Delhi High Court have viewed such portal-upload as incomplete service, particularly where the relevant notices/orders may be referable to two separate tabs, namely “View Additional Notices/Orders” and “View Notices and Orders”, the Hon’ble Supreme Court issued notice, returnable in four weeks.
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GVK Jaipur Expressway Pvt. Ltd. (“the Petitioner”) was issued an order in FORM GST DRC-07 dated February 29, 2024, raising a demand of Rs. 3.39 crores, wherein it was specifically found that the Petitioner did not discharge its due GST liability through FORM GST DRC-13 for the FY 2018-19 and accordingly, the demand along with interest and penalty was imposed under Section 74 of the Rajasthan Goods and Services Tax Act, 2017 (“the RGST Act”)/ the Central Goods and Services Tax Act, 2017 (“the CGST Act”).
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The said order was not challenged by the Petitioner in appeal. Consequently, vide order dated December 19, 2025, the bank account of the Petitioner was attached against the total demand, including tax and interest, of Rs. 14,06,54,640/-.
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Aggrieved, the Petitioner filed a writ petition before the Hon’ble Rajasthan High Court contending that it did not come to know about the orders passed by the GST Authorities and that the SCN as well as the order in FORM GST DRC-07 were not properly communicated and placed on the GST Portal. The Petitioner further relied upon the judgment of the Hon’ble Rajasthan High Court in Eagle Trans Shipping and Logistics India Private Ltd. v. Union of India & Ors. , wherein the assessee therein was allowed to file an appeal on the ground that a person cannot be left remediless, if the time period for filing of appeal has expired and there are valid reasons for the delay in filing of the appeal.
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However, the Hon’ble Rajasthan High Court in GVK Jaipur Expressway Pvt. Ltd. v. Deputy Commissioner of State Tax & Ors. dismissed the writ petition, holding that a deliberate ignorance had been shown towards the SCN and the order, since it is not possible for a company to remain unaware of an order passed under Section 74, more so, when it continues to hold its GST registration and would, therefore, be filing regular monthly and annual returns. The Court further noted that neither an appeal was filed nor any attempt was made to file an appeal, and instead, the Petitioner had merely moved a rectification application seeking rectification of the order. Holding that equity does not lie in favour of the Petitioner and distinguishing the judgment in Eagle Trans Shipping (supra), the writ petition was dismissed.
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Aggrieved by the dismissal of the writ petition, the Petitioner filed the present Special Leave Petition before the Hon’ble Supreme Court.
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Whether service of the SCN and the adjudication order by merely uploading the same on the GST Common Portal constitutes valid service, particularly where the relevant notices/orders may be referable to two separate tabs, namely “View Additional Notices/Orders” and “View Notices and Orders”?
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The Hon’ble Supreme Court in SLP(C) No. 25965 of 2026 held as under:
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- Noted that, the Petitioner had raised the issue of non-service of the notice as well as the order, and that the notice was allegedly served by uploading it on the Common Portal.
- Observed that, as per the Petitioner, the Hon’ble Madras High Court as well as the Hon’ble Delhi High Court have viewed service of notice by uploading on the portal as incomplete, particularly where the relevant information may be referable to two tabs, namely, “View Additional Notices/Orders” and “View Notices and Orders”, and that the Petitioner’s case is squarely covered by the said decisions.
- Accordingly, issued notice in the SLP, returnable in four weeks.
- The case is tentatively listed on September 11, 2026 (computer generated date).
Section 169 of the CGST Act prescribes the modes of service of any decision, order, summons, notice or other communication, namely: (a) by giving or tendering it directly or by a messenger/courier; (b) by registered post, speed post or courier with acknowledgement due; (c) by e-mail; (d) by making it available on the common portal; (e) by publication in a newspaper; or (f) by affixation. Further, Section 169(2) of the CGST Act provides that every such communication shall be deemed to have been served on the date on which it is tendered, published or affixed, as the case may be.
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The moot question, which has divided the High Courts, is whether mere uploading of the SCN/order on the Common Portal under Section 169(1)(d) of the CGST Act, by itself, constitutes valid and effective service, especially in cases where such notices/orders were housed under the “View Additional Notices/Orders” tab, which was not readily visible to taxpayers, as against the regular “View Notices and Orders” tab. Notably, taking cognizance of this anomaly, the GSTN re-designed the portal in January 2024 to merge both the tabs under a single window, which itself is a tacit acknowledgment of the confusion caused by the twin-tab architecture.
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A consistent line of decisions has favoured the taxpayer on this issue. The Hon’ble Madras High Court in East Coast Constructions and Industries Ltd. v. Assistant Commissioner (ST) and in Sabari Infra Pvt. Ltd. v. Assistant Commissioner (ST) set aside ex parte orders where the notices/orders were merely uploaded under the “View Additional Notices and Orders” tab without any effective communication to the taxpayer. Similarly, the Hon’ble Delhi High Court in Anhad Impex v. Assistant Commissioner held that uploading of the SCN under the “Additional Notices” tab did not amount to sufficient communication and remanded the matter for fresh adjudication. The Hon’ble Allahabad High Court in Ola Fleet Technologies Pvt. Ltd. v. State of U.P. also extended the benefit of doubt to the taxpayer where the order was reflected under the “Additional Notices and Orders” tab. Further, the Madurai Bench of the Hon’ble Madras High Court in Mrs. K. Balakrishnan, Balu Cables v. O/o. the Assistant Commissioner of GST (2024) went a step ahead to hold that where no response is forthcoming from the taxpayer to the notices uploaded on the portal, the Department ought to explore other effective modes of service prescribed under Section 169 of the CGST Act, such as RPAD, instead of mechanically completing the formality by portal upload.
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Per contra, a contrary line of decisions, including that of the Hon’ble Madras High Court in Poomika Infra Developers v. State Tax Officer (January 2025), has taken the view that making a notice/order available on the Common Portal is itself a statutorily prescribed and independent mode of service under Section 169(1)(d) of the CGST Act, that the modes prescribed thereunder are alternative and not sequential, and hence, service stands complete upon such upload. The Hon’ble Rajasthan High Court, in the impugned judgment, has adopted a similar approach, albeit resting primarily on the conduct of the taxpayer in exhibiting “deliberate ignorance”.
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The issuance of notice by the Hon’ble Supreme Court in the present SLP is, therefore, a significant development, as the verdict would authoritatively settle the divergence amongst the High Courts on the validity and sufficiency of portal-based service under Section 169 of the CGST Act. The outcome would have a direct bearing on a large number of ex parte adjudications, consequential recovery/attachment proceedings, and appeals barred by limitation under Section 107 of the CGST Act, where the taxpayers’ primary grievance is want of effective service. Until the issue is settled, taxpayers would be well-advised to regularly monitor all the tabs on the Common Portal and keep their e-mail and contact details updated, while the Department, on its part, should adopt supplementary modes of service where no response is received, so that adjudication does not get reduced to an empty formality in breach of the principles of natural justice.
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Let us see some scenario where Input tax credit claim need critical thinking -
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Short quantity / damaged quantity
Sometime the goods are received in short quantity due to loss in transit. Or sometime some unit of goods get damaged while unloading of the goods from the vehicle. So, the quantity as mentioned in the invoice is not equal to the quantity actually received by the buyer. In this case, there are two methods of accounting the receipt of the goods. First one is accounting of the net quantity received . Second , account the full quantity mentioned on the invoice and then raise credit note for the short or damaged quantity.
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The second method seems helpful in performing reconciliation of the purchases with GSTR-2B. As in 2B the invoice and credit note details are captured separately. Thus, the total quantity in books matches with the total quantity on invoice and the credit note in books will match with credit note sheet in GSTR-2B .
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A question may arise as to why would a buyer account full quantity when he had received a lesser quantity and then account for the short quantity with a credit note? He would simply account the net quantity received.
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But the method of accounting invoice and credit note separately would certainly give a clarity to the buyer and also to the department officer. It is easier to explain the match of the ITC in books with ITC in invoice sheet in 2B and credit note in books with the Credit note sheet in 2B.
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Retention money
This concept is common in construction sector where the service receiver holds some part of the amount in every RA bill till the entire civil project gets completed. Once the project is completed may be in 6 months or 1 year or may be 1.5 years' time the money on hold may be released thereafter.
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A civil work may include construction of new factory building or admin building or major expansion to the existing building. RA - Running Account means the tracking of a project milestone and raising invoice according to the completion of the project.
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There is a condition u/s 16(2) of CGST Act, 2017 to claim ITC. The section requires the buyer to make full payment (basic value + GST) to the vendor. Since the payment is on hold the proportionate credit to the extend on hold payment the ITC need to be reversed.
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There exist different view that payment of agreed value should be considered for payment instead of considering the invoice value. The quantum of payment is agreed by both the parties and statutory law should not insist on making payment of invoice value.
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Free samples
Some quantity of goods are generally given to the distributor free of cost to boost sales. This is required to create market for new product. The free quantity eligibility depends upon the turnover of the distributor. For instance, if you buy 10 quantity you will get 2 quantity free. Similarly, on 100 quantity purchase, 20 quantity would be given as free. This is not a "buy one get one free concept" but it is a commitment of selling a targeted quantity of goods to the buyer and free goods are reward for that.
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The movement of goods are taken place through a Delivery Challan mentioning value of goods and GST. The value of goods is generally MRP or market value of similar product. Such nominal value also required for e-way bill purpose.
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Buy one get one free
'Buy one and get another one free' is one of the marketing techniques. The free product is given through invoice. It is shown on the face of the invoice.
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It appears that one quantity is given free when another quantity is purchased. But the recent Circular clarifies that even though one quantity appears to be free but in practice the cost of another product is embedded in the cost of the first product purchased by paying cost. Accordingly, there is no need for reversal of ITC on goods given as free on face of invoice.
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Annual Maintenance Contract (AMC) Service
The classic example of AMC contract is Air conditioner (AC) service. The service provider charges AMC for services to be given in next 12 months at the beginning of the year itself and raise tax invoice with GST. But since the service receipt is scattered over a period of 12 months , the question arises whether full GST credit is eligible at first month itself or wait till 12 months to become eligible to claim credit?
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The invoice copy is received, the invoice appears in 2B , tax is paid by supplier, etc. and it is recorded in books by the recipient also. In practice the ITC is taken on receiving the invoice and matching the details with 2B.
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GSTIN cancellation
It may happen that GSTIN of the supplier was active at the time of issuing invoice but later-on their GSTIN got cancelled. The ITC may be rejected by the officer because of cancelled GSTIN of the supplier. If the ITC is negligible then reversal the ITC. Otherwise, wait for the auditor to point it out and then justify with the case law that 'Lex Non Cogit ad Impossibilia' and other valid justifications.
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Input tax Credit (ITC) should be correctly recorded in the books of accounts. Timely recording in books is of great advantage. It helps in working capital management.
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Sometime the invoices are received at the reception of the office but not forwarded to the accounts department. And sometime the invoices are with the procurement team but due to service pendency or issue in service the invoice is held by that department. These practical business issues leads to delay in accounting the invoices. These invoices then remain as a reconciliation item in the GST return working.
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GSTR-2B is a facilitation of the government to the recipient to make them aware that these are their purchases. We can say that it is similar to 26AS statement of Income tax. GSTR-2B credit cannot be directly accommodated in the books because they are only a reflection of your suppliers' compliance to you, and not a complete purchases. But certainly a very helpful report which a tax payer can rely upon and comply GST.
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IMS (Invoice Management System) is a real time statement where invoices uploaded by the vendor is populated in it. Even if you don't follow the IMS procedure of acceptance, rejection and on-hold activity but certainly you can use it so ascertain the purchases you made during the period. You may also follow up with the vendor or with internal stakeholder to collates invoices so that you can record it in books of accounts timely.
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Tax should be paid by the vendor to the government. This is one of the condition given u/s 16 of CGST Act, 2017 to take ITC as you already aware of. Some vendors does their tax compliance through a tax consultant. With the volume of work the consultant has they may skip to upload your invoice in the GSTR-1 return. It may also happen that tax is also not paid to the government. In such cases, the ITC is denied to you (buyer). You must highlight it to the vendor and give opportunity to regularise the compliance by uploading the invoice and making payment to the government. If that does not happen even after repeated request then you may recover the tax component from your vendor ledger.
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In line with this, you may enter a GST clause in the agreement (oral or written) that if GST is not populated in GSTR-2B then you will be withholding the GST component. Since you already paid the tax component to the vendor , getting ITC rejected would end paying tax again to the government. Hence, recovering that part from the vendor is a correct course of action. Also, the vendor is not suppose to profit out of the tax collected from buyer. He is an agent of the government. He must remit that tax to the government. He is an agent in the manner that he collects the tax from customer and remit to the government. He cannot skip doing his job.
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As an alternate , I think the GST can work like TDS (Tax deducted at Source) where buyer withhold GST from the payment to the vendor and deposit it directly to the government. So, every transaction would be reported in return on monthly basis (as many taxpayer are monthly filer) and it would populate to the vendor for offsetting against their GST payable.
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In this TDS like compliance the challenge would be that the buyer need to make the payment to government on monthly basis despite of the payment terms agreed with the vendor. The payment terms are 30 days , 60 days or in some cases 90 days. This is generally followed. Exceptional payment terms of 180 days or more also exist in a commercial transaction.
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What do you think of any other challenges if TDS concept of tax payment introduced in GST? Put you thoughts in the comment section below.
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There are no free lunches in this world. India's businesses just found out the one they'd been eating for years had a bill attached all along.
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For years, UPI has been treated by businesses as a payment channel with virtually no direct merchant cost. The proposed MDR framework changes that assumption. More importantly, the change is not confined to payment costs it creates consequences for accounting, GST, reconciliation, pricing and internal controls.
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Since, parliament has given accent to the Taxation and Other Laws (Amendment) Bill, thus from October 15, 2026, there will be levy of merchant discount rate charges (MDR Charges) on UPI payments on transactions above the prescribed threshold limit.
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For an industry built on the promise of "free," that single decimal point affects business's economics. The MDR fees of 0.4% as proposed by Government of India will be levied by the NPCI on the amount to be credited to the merchant, directly impacting the books of accounts of the merchant.
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From October 15, the finance and Accounting team will have to add a new head to the chart of accounts, prepare sales reconciliation, and will have to account for GST input tax credit.
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The accounting story is where it gets interesting, and where most of the coverage so far has stopped short. Before getting to the books, though, it's worth understanding why zero-MDR ends now rather than at some other time because the mechanism the Government used to open this door says something about how much room it's kept to redraw the line again.
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The Legal Mechanism
The zero-MDR mandate was never a commercial choice it was a statutory bar under Section 10A of the Payment and Settlement System Act, 2007 which prohibited any charge on payments made through the electronic modes prescribed under Section 269SU of the Income-tax Act, 1961 (UPI and RuPay debit cards among them).
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However, the Taxation and Other Laws (Amendment) Act, 2026 has removed the blanket statutory protection into a notification-dependent one. Zero-charge protection now applies only to whatever electronic payment modes the Central Government chooses to notify. A mode the Government does not notify simply falls outside the bar, and the ordinary commercial freedom to price a service applies.
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On 14 September 2026, the Government exercised that power and notified UPI transactions up to ₹2,000 transactions as protected.
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What attracts MDR ?
General P2M transactions above ₹2,000: 0.4% MDR, shared among issuing/remitter bank, acquiring bank, payment service provider and UPI app, capped at ₹300 for transactions of ₹75,000 and above.
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- Essential/thin-margin sectors (railways, telecom, insurance, fuel, agricultural inputs): a flat ₹5 per transaction above ₹2,000, giving cost certainty rather than a percentage exposure.
- Capital-market transactions (mutual funds, securities, stockbrokers, dealers): 0.02%, capped at ₹300.
- Small merchants: those receiving under ₹1 lakh a month through UPI QR codes remain fully exempt from the new charge, keeping kirana-scale acceptance untouched while pulling in higher-volume merchants.
It has been stated that the merchant has to bear the cost of MDR charge, and customers do not pay this. Banks have been directed to ensure merchants don't pass MDR through, and UPI app providers are barred from levying platform fees or hidden charges. This is a cost inside the merchant payment ecosystem which is precisely why it has to be absorbed in the books, not billed separately.
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However, increasing the cost for merchant will rise the rate for the goods or service, stating MDR a non transferable charge is effectively hold zero value.
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Accounting Treatment: Where the Money Actually Goes
Because the merchant cannot invoice MDR separately to the customer, it has to be built into cost of sales or booked as an indirect expense not shown as a deduction from sales revenue.
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Example: A merchant sells goods worth ₹10,000, taxed at 18% GST, invoice value ₹11,800, paid via an eligible UPI transaction.
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In percentage terms, the merchant gives up roughly 0.48% of the transaction value (0.4% MDR plus GST on that MDR) small in isolation, but on high-volume, thin-margin businesses, a recurring leak that compounds across thousands of transactions a month.
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Suggested journal entries:
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This means two changes to the accounting system before 15 October:
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- (1) a new chart-of-accounts head an indirect expense ledger for MDR and
- (2) a process to book that expense simultaneously with every UPI receipt above ₹2,000, rather than net it off silently against revenue.
Most POS/accounting software will need a rule change here; reconciliation teams should not be manually adjusting this transaction by transaction.
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The merchant will separately receive an invoice from the UPI ecosystem participant (routed via the beneficiary/acquiring bank) for the MDR service fee and the GST on it.
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A GST-registered business, once it satisfies the conditions under Section 16 of the CGST Act - a valid tax invoice, receipt of service, GST actually paid by the supplier and return filed, and payment made to the vendor can claim input tax credit on that GST.
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But ITC eligibility is not instantaneous: it depends on the counterparty's compliance (GSTR-2B matching) and on payment being made within the statutory window, which means a temporary working-capital block between the deduction and the credit being available to set off.
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Where the Full Cost Becomes Burden
For businesses dealing in GST-exempt goods or services, or registered under the composition scheme, there is no ITC to claim. The entire MDR and the GST on it becomes a straight cost, with no offsetting credit this group absorbs the charge in full, and it should be modelled as a direct margin hit, not a pass-through compliance item.
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Refunds: An Open Question, With a Likely Answer
If a customer pays via UPI and later seeks a refund, MDR has already been deducted on the original inflow. Whether MDR is deducted again on the refund leg effectively taxing the same transaction twice is not yet settled by the framework.
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Card-network practice offers a reasonable precedent: MDR is typically not refunded to the merchant when a sale is reversed, meaning the merchant bears the original MDR cost even on a cancelled sale, and a second charge on the refund transfer itself would be an additional cost layered on top.
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Given the Government's position that merchants bear the MDR cost, businesses with high return rates (electronics, apparel, e-commerce) should plan for the worst case MDR absorbed on both legs until NPCI or the banks clarify treatment, and build this into pricing or refund-policy assumptions now rather than after the fact.
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Who Gets Hit Hardest
The businesses most exposed are those taking instant, direct payment from end consumers - hospitals, electronics retailers, medical stores, restaurants, and similar high-ticket, walk-in businesses where UPI is the default payment rail and transaction values routinely cross ₹2,000. Whereas, formal B2B businesses are comparatively insulated: they typically settle through NEFT/IMPS/RTGS for vendor and institutional payments precisely because those channels preserve a documented audit trail, and those rails sit outside this MDR framework entirely.
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In other words, the dividing line isn't business size it's payment channel and average ticket size.
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The ₹1 lakh/month small-merchant exemption pulls the smallest UPI-QR acceptors out of this analysis altogether, which narrows the real-world impact to mid-size and larger merchants transacting at volume - exactly the segment that should be updating its accounting systems before the October cutover.
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A Live Legal Overhang
Before finance teams treat this as settled, it's worth noting that a PIL has been filed in the Supreme Court challenging the Finance Ministry's 14 September notification and the amended Section 10A itself, in the case of Anjan Datta vs. Union of India & Ors. arguing that “...the framework itself acknowledges that the merchant must bear a charge on each qualifying receipt. For low-margin traders, service providers and digitally dependent businesses, that cost necessarily enters the price structure, reduces working capital, or induces refusal of UPI and splitting of transactions. A bare direction against an expressly recognised economic consequence does not eliminate the burden,"
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Further, it was argued that “A transaction of ₹2,001 attracts a percentage charge while one of ₹2,000 does not; a merchant may lose protection by crossing a monthly aggregate boundary unrelated to margin, turnover, geography or ability to bear the fee; and the framework grants a proportionately larger benefit to very high-value transactions through the cap. These cliffs are capable of distorting behaviour and discriminating between similarly situated merchants”.
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It will be interesting to see judiciary’s view on the levy of MDR charges, but the finance and accounting team must tighten their belt to accommodate the MDR charges in the books of accounts and for statutory compliances.
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Action Checklist for Finance Teams
- Add a dedicated MDR expense ledger and an input-GST-on-MDR ledger to the chart of accounts.
- Configure billing/POS systems to auto-book MDR and GST-on-MDR against every eligible UPI receipt above ₹2,000, rather than netting silently.
- Build a vendor-invoice tracking process for MDR bills from the acquiring/beneficiary bank, so ITC claims aren't missed and Section 16 conditions are monitored.
- For composition-scheme or exempt-supply businesses, re-model margins to absorb MDR as a direct cost with no offsetting credit.
- Decide a refund policy assumption now treat MDR as non-recoverable on the original sale, and budget for possible re-deduction on the refund leg until clarified.
- Track the Supreme Court proceeding, but don't defer system changes pending its outcome the framework is live from 15 October regardless.
DISCLAIMER: The views expressed are strictly of Mr. Pradyuman Joshi. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation. The author does not accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.
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The Hon'ble Supreme Court in M/s Nageen Traders and Molding India Pvt. Ltd. v. State of U.P. & Ors. issued notice and stayed the operation of the judgment of the Hon'ble Allahabad High Court, Lucknow Bench, in M/s Nageen Traders and Molding India Pvt. Ltd. v. State of U.P. & Ors. , wherein the High Court had held that the Deputy Commissioner of State Tax was competent to issue a show cause notice under Section 122 of the Uttar Pradesh Goods and Services Tax Act, 2017 ("the UPGST Act") and had relegated the assessee to the statutory appellate remedy by applying the doctrine of election.
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M/s Nageen Traders and Molding India Pvt. Ltd. ("the Petitioner") was issued a show cause notice dated November 19, 2025 in Form GST DRC-01 under Section 122(1)(ii) of the UPGST Act for FY 2023-24 by the Deputy Commissioner of State Tax, proposing penalty exceeding Rs. 1 crore. After the Petitioner contested the notice on merits, a penalty order dated June 24, 2026 under Sections 122(1)(ii) and 122(1)(vii) with Form GST DRC-07 ("the Impugned Order") was passed.
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The Petitioner challenged the show cause notice and the Impugned Order before the High Court under Article 226 contending that the expression "proper officer" has not been defined for the purposes of Section 122; that the CBIC, noticing this lacuna, issued Circular No. 254/11/2025-GST dated October 27, 2025 prescribing the proper officer and monetary limits for notices under Sections 74A and 122; that a penalty above Rs. 1 crore could be proposed only by an Additional or Joint Commissioner; and that unless the State issued a corresponding circular, the notice issued by the Deputy Commissioner was without jurisdiction.
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The State relied on UPGST Circulars dated December 11, 2018 and May 10, 2022 to contend that the proper officer for Section 122 is the proper officer under Section 127 and that, for taxpayers with turnover exceeding Rs. 2.5 crore, the Deputy Commissioner exercises such jurisdiction.
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- Whether a show cause notice under Section 122 of the UPGST Act proposing penalty above Rs. 1 crore, issued by the Deputy Commissioner of State Tax, suffers from lack of jurisdiction in the absence of the expression "proper officer" in Section 122 and in view of CBIC Circular No. 254/11/2025-GST?
- Whether an assessee who participated in the proceedings on merits without objecting to jurisdiction can be relegated to the statutory appellate remedy under the doctrine of election?
The Hon'ble Allahabad High Court, Lucknow Bench, in Writ Tax Nos. 989, 991 and 992 of 2026 held as under:
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- Observed that Section 127 empowers the proper officer to levy penalty not covered under Sections 62, 63, 64, 73, 74, 129 or 130; the clarificatory Circular dated December 11, 2018 provides that the proper officer under Section 127 is competent to issue notice under Section 122, so the expression need not appear in Section 122 itself.
- Noted that, per the Circular dated May 10, 2022, jurisdiction in cases exceeding Rs. 2.5 crore lies with the Deputy Commissioner and, prima facie, the issuing authority did not lack jurisdiction.
- Noted that the Petitioner raised no jurisdictional objection at the notice stage, argued on merits and took a volte-face only after an adverse order; though jurisdiction can be raised before a Constitutional Court at any stage, Article 226 jurisdiction is discretionary.
- Held that the Petitioner is hit by the doctrine of election and is to be relegated to the statutory appellate remedy; the writ petitions were disposed of with liberty to file appeal, with the benefit of Section 14 of the Limitation Act, 1963 for the period the writ remained pending.
On the Petitioner's challenge, the Hon'ble Supreme Court issued notice returnable on October 09, 2026 and directed that, in the meantime, there shall be stay of operation of the impugned orders of the High Court.
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Section 2(91) of the CGST Act / UPGST Act defines "proper officer", in relation to any function, as the Commissioner or the officer to whom that function has been assigned by the Commissioner, and Section 5(2) permits such assignment. Section 122, unlike Sections 73, 74 and 74A, does not itself use the words "proper officer"; the power to adjudicate such penalty flows from Section 127. Centrally, Circular No. 31/05/2018-GST dated February 09, 2018 fixed amount-based limits (Superintendent up to Rs. 10 lakh; Deputy/Assistant Commissioner up to Rs. 1 crore; Additional/Joint Commissioner above Rs. 1 crore), and Circular No. 254/11/2025-GST dated October 27, 2025 extended this scheme to Sections 74A and 122. The UPGST circulars, however, allocate jurisdiction on the taxpayer's turnover rather than the amount involved, which is the crux of the dispute before the Hon'ble Supreme Court, especially as Section 6 cross-empowers State officers under the CGST Act.
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In Canon India Pvt. Ltd. v. Commissioner of Customs the Hon'ble Supreme Court held that a notice by an officer not assigned as "the proper officer" is without jurisdiction, reconsidered in Commissioner of Customs v. Canon India Pvt. Ltd. , which reaffirmed that competence depends on valid assignment of function. On alternative remedy, Whirlpool Corporation v. Registrar of Trade Marks recognises lack of jurisdiction as an exception to the rule of alternative remedy, and in Godrej Sara Lee Ltd. v. Excise and Taxation Officer-cum-Assessing Authority the Court deprecated relegation of a pure jurisdictional question to the statutory appeal. Contrarily, Assistant Commissioner of State Tax v. Commercial Steel Ltd. holds that writ jurisdiction should ordinarily not be exercised where an efficacious statutory remedy exists. Taxpayers facing Section 122 notices from State officers should raise the jurisdictional objection at the threshold; the hearing on October 09, 2026 merits close watch.
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Input Tax Credit (ITC) as a concept is easy to understand, but it pose challenges when we want to claim the credit. This is because we have GSTR-2B, 3B , IMS, purchase register, bank statement, vendor confirmation, etc. in addition to the conditions prescribed under section 16 of CGST Act, 2017, to be checked and verify before we arrive at claimable credit.
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Table 4 of GSTR-3B
The only method to claim ITC is GSTR-3B. One cannot claim it by login into electronic credit ledger (ECL) and inputting the ITC amount or one cannot claim ITC in annual return - GSTR-9/9C.
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The ITC is claimed vide table 4 of GSTR-3B. It has 4 parts viz A, B, C & D. For better understanding it is termed as table 4(A), 4(B), 4(C) and 4(D).
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Table 4(A) is further divided into 5 rows.
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- row 1 - Import of goods,
- row 2 - Import of services,
- row 3 - RCM ,
- row 4 - ISD and
- row 5 - all other ITC
- row 1 - blocked ITC and not claimable ITC
- row 2 - mismatch ITC and claimable ITC
- row 1 - reclaimed ITC
- row 2 - unclaimable ITC due to PoS and time barred ITC
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Here is the screen shot of Table 4 of GSTR-3B
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In a situation where the invoices dated August, 2026 is received and recorded in books in the same month. Then ITC shall be shown in table 4 alone.
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And , where an invoices dated August, 2026 is received and recorded in books in September, 2026 , the reporting of ITC shall be like this -
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- report the ITC in table 4(A)(5)
- show in table 4(B)(2)
by this ITC will not flow to table 4(C) which is connected to 'Electronic Credit Ledger' in common portal. However, the government comes to know the ITC is reported by vendor but recipient could not claim it in the same month.
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Electronic Credit Reversal and Reclaim Statement
In current month working in GSTR-2B mention a remark that this ITC could not be claimed and take an extract from 'Electronic Credit Reversal and Reclaim Statement' and keep it in separate sheet in 3B working file.
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Next month the parked ITC accounted in books becomes eligible to claim. In current month 2B add the last month unmatched ITC from 2B and match it.
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In table 4(A) the said last month ITC need to be added and the same is need to be shown in table 4(D)(1). By doing so, the ITC in table 4(A) which should be same as in current month 2B will be reduced by ITC in 4(D)(1) to match with current month 2B ITC. This table 4(D)(1) is linked to 'Electronic Credit Reversal and Reclaim Statement'. The ITC so parked last month will get removed from this table basis 4(D)(1) table.
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This exercise need correct tracking in working and in example it was one invoice but in practical there could be many invoicie.
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Credit Note rejected by customer
Many time goods are sent back by customer due to poor quality or different product. In this case, customer has not accounted said goods in his books as his purchase because he has not accepted it. However, the vendor will issue a credit note to nullify the invoice that he had issued. Both are reported in GSTR-1 and the same gets populated in GSTR-2B of the customer.
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Since customer had not received the goods he will reject the Credit note from IMS. This rejected credit note add up the GST liability of the vendor . The customer might also reject Invoice but that does not get adjusted in the liability of the vendor. In the case, the vendor ends up paying GST again by virtue of rejected Credit note.
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He also cannot adjusted the credit only in 3B as it would be non-compliance of the aforesaid circular no. 170. Government should issue clarification to handle such scenario in GSTR-3B.
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Bank ITC
Banks are charging GST on service charges for financial transaction handles by them. Those credit appear in bank statement. Sometime the GST component are unclear from the statement. However, the details do populate in GSTR-2B and basis this credit can be claimed. But one may request for a yearly statement from Bank having invoices number , GST component which should then match with 2B.
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Flight ticket charges/ Bus charges through online portal
The air ticket or bus travel are booked through an online platform like Thomas Cook or Make My Trip (MMT) etc. These agents raises two invoices. One for their service charges which has GST component. The second is for claim reimbursement of air ticket, bus ticket at actual.
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Air India, Indigo etc. raises and invoice on passengers name. And passenger gives the GSTIN of his company as it is a business tour. In books of account only the agents' ledger are maintain but not the airline or MMT. As such the ITC cannot be matched with books directly. In such case, call for the passenger wise ticket details from the agents and match them with 2B.
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So, two category of credits claimed -
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- air ticket , red bus ticket
- travel agent charges
GSTR-2B clean up
As per the aforesaid circular , total ITC as per 2B is shown in table 4 and unmatched ITC gets parked in 'Electronic Credit Reversal and Reclaim Statement'. There are possibility that in 2B some other vendors had by mistakenly shown the taxpayer's GSTIN. And since this credit is not belonging to you the concerned vendor need to be informed to correct the GSTIN in his GSTR-1. Once they correct it the ITC parked in said ledger should be reversed by showing the concerned ITC by showing in table 4(A) and same in table 4(B)(1). This table bring back the ITC to 4(A) and removes through table 4(B). Thus it does not travels to table 4(C). By doing this, the government will come to know that unrelated ITC are removed from electronic ledger.
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Glance into GSTR-2 and 3
Initially, it was told that GSTR-2 will populate all the ITC that their respective vendors upload in their GSTR-1. Then, the invoices in GSTR-2 need to be confirmed or accepted , rejected or kept on hold. The accepted credit will become claimable ITC which will flow into GSTR-3. In this the GST payable would also be coming from GSTR-1. Thus, GSTR-3 was a return with a consolidation of GSTR-1 and GSTR-2 which would compute net GST payable after offsetting the ITC with the liability. But, as everybody witnessed that GSTR-2 and GSTR-3 never came into effect. And a temporary form viz GSTR-3B was introduced through which tax has been collected by the Govt. This from GSTR-3B was in place of GSTR-3.
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GSTR-3B as a return
“(5) Where the time limit for furnishing of details in FORM GSTR-1 under section 37 or in FORM GSTR-2 under section 38 has been extended, the return specified in sub-section (1) of section 39 shall, in such manner and subject to such conditions as the Commissioner may, by notification, specify, be furnished in FORM GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner:
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Provided that where a return in FORM GSTR-3B is required to be furnished by a person referred to in sub-rule (1) then such person shall not be required to furnish the return in FORM GSTR-3.”;
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(b) sub-rule (6) shall be omitted with effect from the 1st July, 2017.
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GSTR-2A /2B
This is a dynamic report which keeps getting update basis the GSTR-1 filed by the vendor. But since it is dynamic report it could not be relied by the officer. Thus a need of a static report was felt necessary and GSTR-2B was introduced in 2020.
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Rule 36(4) allowed to take additional 20% credit on the invoices which are not appearing in 2A report. The limit was reduced to 10% and then to 5%.
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- 09.10.2019 to 31.12.2019 - 20% additional claim
- 01.01.2020 to 31.12.2020 - 10% additional claim
- 01.01.2021 to 31.12.2021 - 5% additional claim
From 01.01.2022 , GSTR-2B was made mandatory for claiming ITC. The invoices which are populating in 2B report that much ITC only could be claimed.
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4 Judgment by Ms.Nidhi Aggarwal
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Ms. Nidhi Aggarwal is delighted to present judgment with a great vision to spread complex GST law in a simple manner amongst the taxpayers, tax professionals, students and knowledge seeker.
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Lawgics- 12 Judgment is added for your reading
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5. GST Notes by CMA Anil Sharma
1) Shri CMA Anil Sharma, Shri CMA Gurdev Singh Saini and Smt. CMA Bhawna Sharma posted Chapter-19 recently containing CGST Act in simple language in PPT format. This is to make dealers, professionals, academicians, students etc. understand the basics of GST laws.
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Chapter-19th slide is given below.
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