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This website contains information about recent changes mainly in GST laws. It also contains Articles on various topic in GST. Please visit the website and read more.
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Dear Reader,
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Please find newsletter for your reading and reference.
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Newsletter no.96 dated 07.08.2023
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Index of the Newsletter
- Recent updates
- GST in media
- Articles
- Lawgics by Ms.Nidhi Aggarwal
- GST notes by CMA Anil Sharma
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Office of the Commissioner of Commercial Taxes, Nandanam, Chennai issued Circular No. 07/2026-TNGST dated 25.06.2026 regarding GST- Return Scrutiny under Section 61 of the TNGST Act, 2017 and adjudication proceedings - Prior approval for suo moto scrutiny notices and ex parte orders.
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Detailed guidelines were issued to the Proper officers for adjudication in the Assessment Circles, in the Circular cited, to make adjudication process more transparent, reduce the litigations and realize revenue.
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In this direction, system generated scrutiny notices based on risk parameters have been made available to the Proper Officers to ensure uniformity and monitoring of the return scrutiny process. Instructions have also been issued to all Proper Officers to process the system-generated scrutiny notices by following the provisions of the GST Acts and Rules and training has been imparted for adherence to quality standards in the adjudication process.
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The scrutiny notices generated by the IT wing of the department and made available are detailed below:
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CBIC issued clarification via F. No. CBIC-20016/75/2025-GST dated 25.09.2025 on requirement of separate GST registration for importers storing goods in Warehouses in other States
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Central Board of Indirect Taxes and Customs (CBIC) issued Circular no. 256/02/2026-GST dated 25.07.2026 to provide Clarification regarding filing of appeal by department before the Goods and Services Appellate Tribunal (GSTAT) against order of appellate authority (where Orders-in-Original have been passed by a Common Adjudicating Authority in DGGI cases)
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Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
F. No. CBIC-20010/12/2026-GST
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Circular No. 256/02/2026-GST dated 25.07.2026
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The Principal Chief Commissioners/ Chief Commissioners (All)
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The Principal Directors General/ Directors General (All)
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Subject: Clarification regarding filing of appeal by department before the Goods and Services Appellate Tribunal against order of appellate authority (where Orders-in-Original have been passed by a Common Adjudicating Authority in DGGI cases) – reg.
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Kind attention is drawn to notification No. 02/2022-Central Tax dated 11th March, 2022 wherein para 3A and Table V were inserted in notification No. 02/2017-Central Tax dated 19th June, 2017 (and further amended by notification No. 27/2024- Central Tax, dated 25th November, 2024), to empower Additional/ Joint Commissioners of Central Tax of specified Central Tax Commissionerates (hereinafter referred to as “Common Adjudicating Authority” or “CAA”), with all India Jurisdiction for the purpose of adjudication of the show cause notices issued by the officers of the Directorate General of Goods and Services Tax Intelligence (herein after referred as “DGGI”).
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2. Attention is further drawn to circular No. 169/01/2022-GST dated 12th March 2022 and circular No. 239/33/2024-GST dated 4th December 2024 wherein guidelines were issued with respect to assignment of show cause notices for adjudication and passing of order by a CAA, in respect of cases investigated by the officers of the DGGI.
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3. Further, vide circular No. 250/07/2025-GST dated 24th June 2025, guidelines were issues with respect to reviewing and revisional authority and appeal by department before the appellate authority against orders passed by a CAA.
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4. References have been received from field formations seeking clarification regarding filing of appeal by the department before the Goods and Services Tax Appellate Tribunal (hereinafter referred to as ‘GSTAT’), against an order of appellate authority (where Order-in-Original has been passed by a Common Adjudicating Authority in respect of DGGI cases). Clarifications are being sought as to:
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(a) who will be the reviewing authority in respect of such orders of appellate authority in CAA cases?;
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(b) which jurisdictional authority will be required to file an appeal before the GSTAT in such CAA cases?; and
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(c) whether appeal before the GSTAT, in such CAA cases, is required to be filed before the bench of GSTAT having territorial jurisdiction over the location of the taxable person/ noticee or is to be filed before the bench of GSTAT having jurisdiction over Commissionerate of the CAA.
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5. The GSTAT has been constituted under section 109 of the CGST Act, 2017. The territorial jurisdiction of the benches of the GSTAT has been notified through, the notification S.O. 3048(E) [F. NO. A-50050/150/2008-CESTAT-DOR dated the 31st July, 2024 (as amended from time to time), issued by the Central Government under the said section on the recommendations of the GST Council. Appeals to the GSTAT are governed by the provisions of section 112 of the CGST Act, 2017.
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6. The matter has been examined in consultation with the Union Ministry of Law and Justice. In order to ensure uniformity in the procedure of filing of departmental appeals before the GSTAT in such cases (where Orders-in-Original have been passed by a CAA in DGGI cases), the Central Board of Indirect Taxes and Customs, hereby issues the following clarifications in respect of procedure to be followed for the purposes of review of orders passed by the appellate authority in such CAA cases and for filing of appeal by department against such order of appellate authorities:
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(a). Communication of order by the appellate authority: The appellate authority, upon passing of an order-in-appeal, under section 107 of the CGST Act, in respect of an appeal arising from an order-in-original passed by the Common Adjudicating Authority, shall upload the order-in-appeal on the common portal, and shall also send a copy of the said order to the Pr. Commissioner/ Commissioner of CGST Commissionerate having jurisdiction over Common Adjudication Authority, through email, along with a with a physical copy.
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(b). The Pr. Commissioner/ Commissioner of CGST Commissionerate having jurisdiction over the Common Adjudication Authority, shall examine the said order-in-appeal passed by the appellate authority in such cases, after seeking comments and inputs from DGGI (if required) at the earliest, and he shall, forward such comments to the jurisdictional CGST Pr. Commissioner/ Commissioners of all the taxable persons/ noticees involved in the said order-in-original, with his recommendations.
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(c). Reviewing authority: The jurisdictional CGST Pr. Commissioner/ Commissioner of a particular taxable person/ noticee shall be the reviewing authority under sub-section (3) of section 112 of CGST Act, 2017 in respect of the order passed by the appellate authority in such CAA cases, in respect of the said taxable person/ notice under his jurisdiction. The said reviewing authority (including the Pr. Commissioner/ Commissioner having jurisdiction over the Common Adjudication Authority) shall, examine the matter regarding the legality and propriety of the order of appellate authority in such CAA cases after taking into consideration, inter alia, the comments and recommendations referred to in para (b) above in accordance with provisions of sub-section (3) of section 112 of CGST Act, 2017. Where the reviewing authority is of the opinion that an appeal is required to be filed by the department against order of the appellate authority in such CAA cases, he may for the purpose of satisfying himself as to the legality or propriety of the said order and for determination of such points arising out of the said order, as may be specified him, may, by order, appoint and direct any officer subordinate to him for filing and pursuing the appeal by the department before the GSTAT.
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(d). Separate appeals have to be filed in respect of each of the taxable person/ noticee, against the order of appellate authority in such CAA cases, by the jurisdictional CGST Commissionerate of the taxable person/ noticee, before the concerned Bench of the GSTAT having territorial jurisdiction over such taxable person/ noticee.
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(e). After such application to the GSTAT has been made, the jurisdictional CGST Pr. Commissioner/ Commissioner shall also intimate the Pr. Commissioner/ Commissioner of CGST Commissionerate having jurisdiction over the Common Adjudication Authority, along with a copy of the appeal filed in this respect. Where the reviewing authority is of the opinion that no appeal by the department is required to be filed against the order of the appellate authority in CAA cases, he shall intimate the same to Pr. Commissioner/ Commissioner of CGST Commissionerate having jurisdiction over the Common Adjudication Authority.
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7. Difficulty, if any, in implementation of the above instructions may please be brought to the notice of the Board.
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(Gaurav Singh)
Commissioner (GST)
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Central Board of Indirect Taxes and Customs (CBIC) issued Circular no. 255/01/2026-GST dated 25.06.2026 to provide Clarification regarding jurisdiction in cases involving migration/ transfer of taxable persons from one jurisdiction to another jurisdiction.
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Central Board of Indirect Taxes and Customs (CBIC) issued Notification no. 02/2026 – Central Tax dated 07.05.2026.
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GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
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Notification No. 02/2026 – Central Tax dated 07.05.2026
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S.O. 2286(E).— In exercise of the powers conferred by sub-section (1A) of section 101A of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the Central Government, on the recommendations of the Council, hereby empowers the Principal Bench of the Appellate Tribunal, New Delhi constituted under sub-section (3) of section 109 of the said Act, to hear appeals made under section 101B of the said Act.
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This notification shall be deemed to have come into force on the 1st day of April, 2026.
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BALASUBRAMANIAN KRISHNAMURTHY,
Joint Secretary
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Central Board of Indirect Taxes and Customs (CBIC) issued Notification no. 01/2026 – Central Tax dated 21.04.2026 that Seeks to extends the due date for furnishing the return in FORM GSTR-3B for the month of March, 2026 till the twenty-first day of April, 2026.
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GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS
Notification No. 01 /2026 Central Tax dated 21.04.2026
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G.S.R (E)… ( In exercise of the powers conferred by sub section (6) of section 39 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Commissioner, on the recommendations of the GST Council, hereby extends the due date for furnishing the return in FORM GSTR 3B for the month of March, 2026 till the twenty first day of April, 2026, for the registered persons who are required to furnish return under sub section (1) of section 39 read with clause (i) of sub rule (1) of rule 61 of the Central Goods and Services Tax Rules, 2017.
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2. This notification shall come into effect from 20th day of April, 2026.
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(Kangale Shrunkhala Motiram)
Director
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Central Board of Indirect Taxes and Customs (CBIC) issued Notification no. 20/2025 – Central Tax dated 31.12.2025 which Seeks to notify Central Goods and Services Tax (Fifth Amendment) Rules, 2025
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1. These rules may be called as the Central Goods and Services Tax (Fifth Amendment) Rules, 2025. They shall come into force from 1st day of February, 2026.
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2. In the Central Goods and Services Tax Rules, 2017 (hereinafter referred to as the said rules), after rule 31C, the following rule shall be inserted, namely: —
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"31D. Value of supply of goods on basis of retail sale price. -(1) Notwithstanding anything contained in the provisions of this Chapter, the value of supply of goods bearing the description specified in column (3), falling under the corresponding Chapter/ heading/ sub-heading/ tariff item specified in column (2), of the Table below, shall be deemed to be the retail sale price declared on such goods, less the amount of tax as applicable, namely: -
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(2) The amount of applicable tax referred to in sub-rule (1) shall be determined in the following manner, namely: —
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Tax amount = (Retail sale price X tax rate in % of applicable taxes) / (100+ sum of applicable tax rate).
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Explanation. — For the purposes of this rule, —
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(a) “applicable tax” means IGST or CGST or SGST or UTGST as the case may be.
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(b) "retail sale price" means the maximum price declared on goods at which such goods in packaged
form may be sold to the ultimate consumer and includes all taxes, duties, surcharge or cess by
whatever name called;
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(c) where on the package of any specified goods more than one retail sale price is declared, the
maximum of such retail sale price shall be deemed to be the retail sale price;
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(d) where the retail sale price declared on packages of any specified goods is altered to increase the
retail sale price at any stage before, during, or after the supply, such altered retail sale price shall be
deemed to be the retail sale price;
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(e) where different retail sale prices are declared on different packages for the sale of any specified
goods above in packaged form in different areas, each such retail sale price shall be the retail sale
price for the purposes of valuation of the specified goods intended to be sold in the area to which
the retail sale price relates.".
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3. In the said rules, in rule 86B, in the first proviso, after clause (e), the following clause shall be inserted, namely: —
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"(f) the registered person other than a manufacturer shall be exempted from the provisions of this rule only in respect of goods specified under rule 31D, on which the tax has been paid by the supplier on the basis of retail sale price:".
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Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub section (i) vide notification No. 3/2017-Central Tax, dated the 19th June, 2017, published vide number G.S.R. 610(E), dated the 19th June, 2017 and were last amended, vide notification No. 18/2025– Central Tax, dated the 31st October, 2025, vide number G.S.R. 805(E), dated the 31st October, 2025
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Central Board of Indirect Taxes and Customs (CBIC) issued Notification no. 19/2025 – Central Tax dated 31.12.2025 which Seeks to notify supplies under section 15(5) of CGST Act for valuation based on Retail sale price (RSP)
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The GST Council meeting, originally scheduled for September 12, has been postponed to October 7 due to the BRICS summit being hosted by India in New Delhi.
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India is hosting the annual BRICS summit in New Delhi on September 12 and 13, which is expected to deliberate on a number of pressing global challenges, including the economic consequences of the West Asia crisis.
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BRICS, originally comprising Brazil, Russia, India, China, and South Africa, expanded in 2024 to include Egypt, Ethiopia, Iran, and the United Arab Emirates, with Indonesia joining in 2025.
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Sources said to news agency PTI that, in view of the BRICS summit, the 57th GST Council meeting has been rescheduled for October 7. The meeting will be preceded by an officers' meeting on October 5 and 6.
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The council, chaired by Finance Minister Nirmala Sitharaman and comprising state finance ministers, would be meeting after a gap of over a year. The 56th GST Council meeting had taken place on September 3-4, 2025, during which the Centre and states decided on a major restructuring of Goods and Services Tax (GST) rates and slabs.
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Effective September 22, 2025, GST became a two-tier structure of 5 and 18 per cent, and a highest 40 per cent rate only for ultra luxury and sin goods, replacing the four slabs of 5, 12, 18 and 28 per cent which was in place since July 1, 2017.
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At its 57th meeting on October 7, 2026, the GST Council is likely to discuss simplification in GST registration of businesses that pass on tax credit of over Rs 2.5 lakh a month.
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Also, automation and other changes in GST registration cancellation is also expected to be taken up by the council.
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Currently, there is no uniformity in the procedure followed by the central GST formation and various state formations in granting GST registration to large businesses who pass on credit over Rs 2.5 lakh/month and this creates uncertainty in the minds of taxpayers.
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The GST Council in its September 2025 meeting had already approved a simplified GST registration scheme for small and low-risk biz and the same was rolled out from November 1.
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Small and low-risk businesses applicants whom the GST system identifies based on data analysis, or those applicants who self-assess that their output tax liability does not exceed Rs 2.5 lakh per month (inclusive of CGST, SGST/UTGST and IGST) can opt for the scheme.
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About 1.68 crore businesses are currently registered under GST.
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Press release no. 2300883 dated 18.08.2026
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Top Tax Officials Deliberate on Key Issues Concerning the Income Tax Department at Conclave
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The two-day conclave of Principal Chief Commissioners of Income Tax and Principal Directors General of Income Tax, organized by the Income Tax Department, concluded today, August 18, in Jaipur. The conclave was chaired by Shri Ravi Agrawal, Chairman, Central Board of Direct Taxes (CBDT).
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The event was attended by Members of the CBDT—Shri Pankaj Kumar Mishra, Shri Sanjay Bahadur, Shri Prasenjit Singh, Ms. G. Aparna Rao, Ms. Pallavi Agrawal and Shri Sunil Kumar Singh—along with Principal Chief Commissioners, Principal Directors General, Commissioners of Income Tax (Administration) and other senior officers from across the country.
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The conclave witnessed extensive deliberations on key issues concerning the Income Tax Department, including e-HRMS, service matters, litigation, reservation policy, taxpayer services, future projects, the Systems Directorate, capacity building, infrastructure, expenditure budget, TDS administration and inter-agency coordination. Senior officers also shared their views and suggestions on the challenges and future priorities of the Department. A documentary produced by the Media Cell of the CBDT was also screened during the programme.
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Shri Ravi Agrawal, Chairman, CBDT, held open and interactive discussions with senior officers on the future direction and functioning of the Department and emphasized the need for an actionable roadmap based on the suggestions received. Detailed discussions were also held on infrastructure requirements and essential facilities for Income Tax offices across the country.
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The programme was organized under the guidance of Shri Ravi Agrawal, Chairman, CBDT, and under the leadership of Shri Sumeet Kumar, Principal Chief Commissioner of Income Tax, Rajasthan. Shri Anil Kumar Bhardwaj, Commissioner of Income Tax (Administration & TPS), Jaipur; Shri Gautam Singh Chaudhary, Additional Commissioner of Income Tax (Administration); Shri Surendra Yadav, Deputy Commissioner of Income Tax (Headquarters); and other officers and staff made significant contributions towards the successful conduct of the conclave.
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At the conclusion of the programme, Ms. G. Aparna Rao, Member (TPS&R), CBDT, delivered the valedictory address. Shri Anil Kumar Bhardwaj, Commissioner of Income Tax (Administration & TPS), Jaipur, thereafter extended a vote of thanks to the Chairman, CBDT, Members of the Board, senior officers and all officers and staff associated with the successful organization of the conclave.
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The conclave concluded on a positive and forward-looking note, with a shared commitment to translating the deliberations and suggestions into concrete action towards strengthening the Department and enhancing taxpayer services.
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Press release dated 18.08.26
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Based on ground intelligence and analysis of data on outward foreign remittances, the Income Tax Department has identified several suspicious entities that remitted large amounts of foreign exchange over the last three years. A nationwide network of entities engaged in remitting funds abroad was uncovered during a search operation conducted on a group of fictitious charitable trusts involved in providing accommodation entries against bogus donations/contributions. Preliminary ground verification revealed that the entities making these remittances were either non-filers or were filing income-tax returns showing very small turnovers. The turnovers had no apparent correlation with the large amounts of money being remitted abroad. They also did not appear to match the stated purpose of the remittances, such as payment for freight, import of software, or import of consulting services. Further ground-level intelligence revealed that these entities were not actually operating from the addresses declared by them.
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Further analysis of the data also revealed that a large number of Form 15CB certificates were issued by a relatively small group of professionals. The remitted funds were also received by a clustered group of entities. Form 15CB, read with Rule 37BB of the Income-tax Rules, 1962 (corresponding to Form 146 read with Rule 220 of the Income-tax Rules, 2026), requires the Accountant certifying a foreign remittance to verify its taxability with reference to the books of account and other relevant documents. However, the findings raise concerns about whether adequate due diligence was carried out by the Accountants before issuing these certificates.
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On 18.08.2026, the Department launched a nationwide detailed verification exercise to verify these foreign remittances, focussing on shell entities, the persons behind them, and the professionals who have issued Form 15CB certificates. Entities located in districts along the country’s land borders and remitting significant amounts of money abroad have also been covered in the exercise. The exercise has covered approximately 394 entities (including 117 entities located in land-border States), and 36 professionals.
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The Department emphasises that Accountants issuing certificates in Form 15CB/Form 146 are expected to exercise due care, diligence and professional judgment. They should properly examine the underlying transactions and relevant facts before certifying the remittances, as these certifications play an important role in maintaining trust in the system.
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Further investigations are currently underway.
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2. GST in Media - Council meeting
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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 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 disclosure of Clause 44 is mandatory in Tax Audit Report for the assessment year 2022-23 and onward. Every tax payer to whom the tax audit is applicable has to also furnish clause 44.
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The taxpayer may or may not be registered under Goods and Services Tax Act but the disclosure is mandatorily required to be furnished.
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The format of clause 44 is given below:
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The above format requires the bifurcation of ‘total amount of expenditure incurred by the taxpayer during the financial year’ into two heading – one is - the expenditure incurred for purchase or availing services from entities registered under GST and second the ‘expenditure incurred for purchase or availing services from entities not registered under GST’.
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The expenses debited to Profit & Loss a/c will form the basis of this clause 44. That is the total expenses as appearing in Profit & Loss a/c will be shown in column (2) of the table above.
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The expenditure incurred from registered entities will be further bifurcated into three headings viz. purchase of exempted goods or services (column (3)), purchase from a composition dealer (column (4)) and purchase of taxable goods or services (column (5)).
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There is no break-up required for an expense incurred toward purchase or availing services from an unregistered dealer (column (7)).
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The expenses such as ‘Salaries and PF, ESIC etc. will not form part of the report/ clause 44 as they are not an expense incurred from any vendor. However, the staff welfare expenses like canteen service, uniform purchase, tea, coffee etc. is an expense born from either a registered vendor or an unregistered vendor and therefore need to be considered for reporting.
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Finance cost like interest on bank loan also will not be reported. Likewise depreciation, bad debts, provisions for expenses, power and fuel, petrol, diesel etc. will not form part of clause 44 disclosures.
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Rest of the expenses like raw material, packing material, consumables, engineering items, professional fees, legal expenses, rent, rates and taxes, insurance etc. which are forming part of Profit and Loss a/c will be considered for this clause.
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The total of all expenses reported in Financials will be considered in column (2) as stated above either expense head wise or as s single amount. This is because the clause does not clarifies as to whether the reporting is required expense wise or a single expense amount will suffice for reporting. So, one may furnish a single amount and keep the head wise expenses working as a supporting of the clause for audit and reference.
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As shown in table below, the expense heading is for reference and amount in column (2) will only form the basis of the reporting including their further bifurcation into taxable, exempt, composition, registered and unregistered at respective columns. The amount at column (6) is the sum of column (3), (4) and (5) and the total of column (6) and column (7) will be equal to expense at column (2).
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The working file will look like –
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How to bifurcate the expenses into ‘purchases from registered vendor’ and their further bifurcation into taxable, exempt and composite vendor purchase and ‘purchase from unregistered vendor’.
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The purchase report based on which return in Form GSTR-3B is prepared to be considered first. The report must have expense GL. Expense GL means the GL into which the cost has been debited while accounting the invoice. If said GL is not captured then it is suggested to add in the report with the help of IT/SAP / report developer etc. If the taxpayer is using SAP system then tax codes should also be captured to identify the product as exempt, taxable etc. or based on the taxes viz. IGST, CGST, SGST and GSTIN of the vendor the expenses can be segregated as taxable, exempt etc.
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In the working, add a new column as ‘Remark’. Apply filter on ‘GSTIN’ in purchase report. Select blank and classify it as ‘unregistered’. Apply filter on transactions having GSTIN, select tax codes of exempt or in tax column as zero and check the item description as exempt to classify it as ‘registered-exempt’. And the transaction having GSTIN and GST amount then classify it as ‘registered-taxable’.
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If the GSTIN is available and goods purchased /expense incurred is taxable and still GST is not charged by the vendor, then it means the vendor is a composite dealer. Classify such transaction as ‘registered-composite’. Alternatively, the GSTIN of the vendor can be searched at www.gst.gov.in to fetch the status of the vendor's GSTIN as ‘regular’ or ‘composition’ dealer.
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Now, based on the fields viz. Remarks, General Ledgers (GL) and expense amount make a pivot table. Select GL at the ‘Row labels’ and remarks at ‘Column Labels’ and amount in ‘Values’ column.
The pivot table will look like –
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In order to plot the expense in the base file, apply Vlookup like:
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The expense will get plotted in respective columns after applying pivot as registered-exempt at column (3), registered-composite at column (4), registered-taxable at column (5) and unregistered vendor purchase at column (7).
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There could be some entries in purchase report of which expense GL is not appearing. Instead clearing account is appearing. This is because in SAP system while GRN the inventory GL is debited. The expense GL is hit after the MIRO/Finance posting is done. Upon completion of MIRO the expense gets debited to expense GL / consumption GL.
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As stated above, when a raw material is purchased it is accounted as an inventory. Thereafter when a production team makes a requisition to stores department to issue the inventory for consumption in their plant area , the material gets accounted into consumption GL.
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The said consumption GL forms part of Profit & Loss account. Hence, in the purchase report wherever inventory or clearing GL appears identify their consumption GL and plot it in an addition column in the report.
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With the basis of the purchase report most of the expenses GL as appearing in column (2) of table above would have been classified into respective expense head/column. And, for the expenses not captured in the purchase report for any reason then the respective expense's GL dump/report to be downloaded in excel.
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Say for e.g. insurance GL. Take a dump/download from accounting system having, inter-alia’, ‘offsetting GL’ column, GL name etc.. In the offsetting GL column the vendor code is reflected (not for all transaction) and wherever the GRIR Clearing GLs appears the vendor code can be pulled from clearing GL dump having document number. Apply vlookup on document number and vendor code.
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Once the vendor code is fetched then apply vlookup basis GSTIN with the vendor master. Same logic as discussed above need to be applied in the report i.e. add a column as ‘Remarks’ and classify expense as registered-taxable, registered-exempt, registered taxable and unregistered vendor.
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In these GL, there will be an entry like – provisions accrued for an expense, pre-paid expense, rectification etc. Their classification into ‘registered’ or ‘unregistered’ purchase would be difficult. But, the logic one may apply is that, if the proportion of expense is more against registered-taxable then classify the aforesaid expense as ‘registered-taxable.
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In the GL report tax codes also appear. It helps in classifying entry as taxable or exempt.
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The expense can be further bifurcated and furnished as exempt in column (3), composition dealer purchase in column (4), registered purchase (5) and unregistered vendor purchase in column (7).
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At the end, apply summation formula at the bottom of each of the column (3), (4), (5) and (7) individually. Apply percentage formula as exempt to total expense, composition to total expense, taxable to total expense and unregistered to total expense. The percentage so arrived will give a glimpse/idea as regard the pattern of purchase i.e. what % of purchases / expenses are from a registered vendor, taxable, exempt and purchase from unregistered vendor.
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In case, the percentage does not depict fair scenario of type of purchase then revisit purchase report and expense GL and recheck the text field for nature of purchase and ensure correct classification is assigned to each line item.
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By the above stated process, a clause 44 gets prepared to the best possible manner.
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CA Nitin Bhuta, Mumbai has compiled and presented Clause 44 applicability in Tax audit report for A.Y. 2022-23 in the slider format/PDF in the link given below.
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4 Lawgics by Ms.Nidhi Aggarwal
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Ms. Nidhi Aggarwal is delighted to present GST Notes/Law in a simplified manner under the title “ Lawgics ”. The note is prepared in a series of PDFs encompassing GST Law and the interpretations thereof in simple manner. The author with a great vision to spread complex GST law in a simple manner amongst the taxpayers, tax professionals, students and knowledge seeker is presenting the Lawgics in piecemeal at regular interval.
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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-15 containing CGST Act in simple language in PPT format. This is to make dealers, professionals, academicians, students etc. understand the basics of GST laws. Each Chapter in CGST Act, 2017 is explained in the form of Slides as given below for easy understanding of the Act:
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Chapter-15 slides given below:-
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