RECENT DEVELOPMENTS IN GOODS AND SERVICES TAX

According to one estimate, Indian economy today is service oriented with 54.9% coming from service sector, 27.1% from industries and 18% from agriculture. India is also projected to become the world’s fourth largest economy in 2025-26.

While the US President has termed Indian economy as a ‘dead’ economy, according to 16th Finance Commission Chairman, Indian economy remains robust, growing at over 7 percent and in dollar terms, growth is more than 7 percent.

As a guard against US tariffs, if India can reduce the GST rates on affected goods, domestic consumption can be increased and India can be shielded to a large extent. This calls for urgent need for GST rate rationalization and in turn holding of GST Council meeting which has not been held in 2025 so far. GST rate cuts is long overdue given the GST revenue as well as too high rates for certain items of goods and services.

Now that centre has appointed judicial and technical members to the principal bench and state benches of the GSTAT, still most of the states are yet to appoint members. It looks like GSTAT may not be functional immediately and may take few months. GST Council should chart out a time bound action plan and GSTAT should soon see the light of the day. Sooner the better.

In a reply to Parliament question, it has been revealed that GST evasion during 2021-2025 is about 17% of the total net collection with amount of Rs. 7 lakh crore in over 30000 cases, and majority of evasion contributed by ITC related frauds.  Indian economy contributes more to global growth then the US.

Lok Sabha and Rajya Sabha have passed the new Income Tax Bill, 2025 which was reintroduced on 11 August after adoption of recommendations of the select panel. Once enacted, it will replace the Income Tax Act, 1961 from next financial year.

GSTAT, Principal Bench, New Delhi pronounced its first order under GST law. The order No. NAPA/31/PB/ 2025 dated 05.08.2025 has been passed by Anti-Profiteering Division of GSTAT hearing for which was concluded on 22.07.2025 under section 171 of CGST Act, 2017 (Anti-profiteering).

GST collection in July, 2025 has shown a growth of 7.5% in gross total collection and 6.7% growth in domestic revenue collection on YoY basis. Total GST collection stood at Rs. 1,95,735 crore as against Rs. 1,82,075 crore in July, 2024. However, domestic refunds grew by 117.6% to Rs. 16,983 crore as against Rs. 7,805 crore only in July, 2024. Total net GST revenue stood at Rs. 1,68,588 crore with a rise of just 1.7% against Rs. 1,65,800 crore in July, 2024. This increased collection has been witnessed despite recent geo-political tension and weak consumer sentiments. However, the pattern indicates a consistent and stable consumption and collection. Though IGST collection has also grown, it may be impacted in next few months due to recent US tariffs.

Appointment of Members at GSTAT

• Government of India has approved the appointment of Judicial Members and Technical Members to the Principal Bench and State Benches of the GST Appellate Tribunal (GSTAT).
• 31 Technical Members have been appointed for State Benches (posting awaited)
• 2 Technical Members have been appointed for Principal Bench at New Delhi
• One Judicial Member has been appointed for the Principal Bench at New Delhi
• 52 Judicial Members have been appointed for State Benches
• These appointments shall be for a period of 4 years or till the age of 67, whichever is earlier.

[Source: F.No. 18/20/2025-EO(SM.II) dated 04.08.2025 issued by Ministry of Personnel, Public Grievances and Pensions, Secretariat of the Appointments Committee of the Cabinet]

GSTAT Order on Anti-Profiteering (Section 171)

• GSTAT, Principal Bench, New Delhi pronounced its first order under GST law.
• The order No. NAPA/31/PB/ 2025 dated 05.08.2025 has been passed by Anti-Profiteering Division of GSTAT hearing for which was concluded on 22.07.2025 under section 171 of CGST Act, 2017 (Anti-profiteering).
• The case pertain to a Subway franchisee, for profiteering Rs. 5.47 lakh by failing to pass on the benefit of a GST rate reduction on restaurant services from 18% to 5% effective November 15, 2017.
• The taxpayer did not reduce menu prices after the GST Council slashed the tax rate on restaurant services. Instead, the DGAP found that the outlet increased the base prices of its products, thereby negating the effect of the tax cut.
• The Bench directed the franchisee to deposit Rs. 5,45,005, along with 18% interest from the date of collection, into the Consumer Welfare Funds of the Centre and the State of Maharashtra within three months. The Tribunal warned that failure to comply would result in recovery by the jurisdictional CGST/SGST Commissioner.
• The Tribunal noted that the franchisee failed to produce any invoices or documents to substantiate its claims, even after multiple opportunities, leading to an ex-parte decision.
• The Tribunal emphasized that price increases “do not happen overnight” without valid cause and noted the lack of any credible evidence from Urban Essence to rebut the DGAP’s findings.
• Although Section 171(3A) of the CGST Act, 2017 allows penalties for profiteering, it came into effect on January 1, 2020, after the profiteering period in this case (July 2017–March 2019). As such, GSTAT ruled that no penalty could be imposed retrospectively.
• It directed CGST/SGST Commissioner to report compliance within four months. Failure to deposit the ordered amount will trigger recovery proceedings.

[Source: Director General of Anti-Profiteering, Central Board of Indirect Taxes & Customs, New Delhi v. Urban Essence (Prop. Aniket Nagnath Nimbalkar) (2025) VIL 01 (GSTAT-DEL-NAPA)]