RECENT DEVELOPMENTS IN GOODS AND SERVICES TAX

Indian economy may expand in current fiscal. According to National Institute of Public Finance and Policy (NIPFP), Indian economy is expected to grown by 7.4% in 2025-26, as the effect of GST rate rationalization kicks in and US economy performs to its potential.

According to Moody’s Ratings, India’s GDP growth for 2026 is likely to be 6.4% as against global growth of 2.5-2.6 percent. It is also expected to remain world’s fasted growing economy with about 6.5% growth in 2026 and 2027. This is supported by expansion in household consumption and strong infrastructure spending. However, private sector may remain cautious about capital spending.

It is expected that for 2025-26, Q2 economic growth may exceed 7% as projected by Reserve Bank of India. The full impact of US tariffs may be seen in Q3 onwards.                                         

The 16th Finance Commission (FC) has submitted its five year report (2026-2031) to the President of India. The Finance Commission suggests the formula for distributing net tax proceeds between the centre and the states and also among states and local bodies. 15th FC had recommended a share of 41% of federal taxes to be shared with states. The report shall be first tabled in Parliament before being placed in public domain.

For the Union Budget 2026-27, MoF has already started meetings and consultations. The meetings with the economists, capital market, start-ups, manufacturing sector, MSME and agriculture sector have been held.

According to one estimate, SBI has estimated that GST collection for November, 2025 may cross Rs. two lakh crore due to lower GST rates and improved compliances. For FMCG’s, despite rate cut, sales volumes have grown in Q2 (July to September). Demand resurgence was noticed in health care and other FMCG items. Inflation has also been low now. 

While GST rate cut implemented in India w.e.f. 22.09.2025 is in vogue now, there could certain situations where such rate cut may not lead to commensurate cut in prices (MRP) of products or services. This could be due to input tax credit provisions or rates not getting reduced on inputs or there being inverted duty and so on. In certain cases, rates have been reduced conditionally that in such cases input tax credit is not allowed adding to the final cost being charged to customers.

CBIC Policy Wing has issued comments on legality of bunching of multiple financial years in single show cause notice, besides clarification on redemption of advance authorization issued by DGFT. GSTN has also issued an advisory on furnishing of bank account detail as per Rule 10A of CGST Rules, 2017.

Simplification of Customs Exemptions

• Till now, the effective customs duty rates operated either through the First Schedule to the Customs Tariff Act, 1975 or through exemption notifications issued under Section 25(1) of the Customs Act which empowers the Central Government to grant partial or full exemption either conditionally or unconditionally.
• Apart from Notification No. 50/2017- Customs dated 30.6.2017, there were other stand-alone notifications which had been issued from time to time for specific purposes.
• As a measure of trade facilitation, 30 standalone notifications have been merged with notification o. 50/2017-Customs dated 30.6.2017. The list of the 30 Notifications is at Annexure. Aside from minor modifications in S. No. 5 of notification No. 39/96-Customs dated 23.7.1996 and omission of entry no. 166A of erstwhile Notification No. 50/2017- Customs dated 30.6.2017, no changes have been made to existing entries.
• Accordingly, Notification No. 45/2025 dated 24th October, 2025 has been issued in supersession of Notification No. 50/2017-Customs dated 30.6.2017 and the 30 notifications.
• These changes will come into effect from 1st November, 2025.

(Source: CBIC Circular No. D.NO No. CBIC -190341/168/2025-TRU dated 24.10.2025 read with 45/2025-Cutoms dated 24.10.2025)

Legality of bunching multiple financial years in single GST demand notice

CBIC, Policy Wing has circulated a set of standard policy comments on the legality of bunching multiple financial years into a single demand notice under the CGST Act, 2017 arising out of challenging the legality, constitutionality and validity of issuance of a consolidated demand notice covering multiple financial years in various High Courts. Accordingly, following assertions have been drawn:

• Composite SCNs for multiple financial years are legally permissible under sections 73/74 of the CGST Act, 2017.
• The proper officer is duly empowered to issue a Show Cause Notice for any period, subject to the statutory framework and there is no express bar in the statute.
• Composite SCNs for multiple financial years do not hit the limitation period provided under sections 73/74 of the CGST Act, 2017.
• Regardless of consolidation, the limitation period for each financial year remains unaffected and is taken into account independently so that the issuance of the notice or order meets the limitation criteria individually for each year concerned. Consolidation serves only as a procedural mechanism and does not dilute or override the temporal restrictions imposed by law on the issuance of notices/orders.
• Consolidation of such SCNs covering multiple financial years is advantageous even to the taxpayer, as it requires appearance only once for presenting submissions in defence at the stage of adjudication. This approach not only prevents duplication of proceedings but also ensures judicial economy by saving valuable time and effort of both the taxpayer and the adjudicating authority.
• It would be incorrect to say that each period necessarily requires a fresh SCN in every case. The law deems the statement as a valid notice, fulfilling the principles of due process. Thus, it can be said that consolidated or clubbed SCNs covering multiple tax periods on identical grounds are not only permissible but envisaged by the statute itself to avoid multiplicity of proceedings.
• Each tax period covered in the SCN is subject to its own limitation period as prescribed under sections 73(10) and 74(10) of CGST Act, 2017.
• Issuance of a consolidated show cause notice is necessitated to establish the modus adopted by such businesses and entities. Issuance of the show cause notice, financial year-wise wise may not be feasible and defeat the purpose of the investigation.
• Judgments in cases related to M/s Titan Company Ltd and M/s Tharayil Medicals decisions are distinguishable/ not binding pan-India.
• The SCNs which are bunched for multiple years and the break-up of the tax for each financial year is made available to the taxpayer, is in congruence with The State of Jammu and Kashmir and Others Versus Caltex (India) Ltd. - 1965 (12) TMI 125 - Supreme Court.
• Where the SCN clearly delineates the tax liability for each financial year, the taxpayer is fully informed of the demand and not prejudiced. The limitation period and the ability to respond to, contest to, or settle the liability on a year-wise basis remains intact, thereby satisfying the principles of natural justice.
• The bundling of multiple years in a single SCN does not result in disqualification from the scheme, provided the conditions under section 128A are satisfied for the eligible years.
• The monetary calculation under section 138(2) of the CGST Act remains proportionate to the tax involved, and compounding is permitted only after payment of the underlying tax, interest, and penalty as required under the third proviso to section 138(1) of the CGST Act, 2017.
• Even if it is assumed and argued that the consolidation of multiple years in one SCN constitutes an alleged irregularity, the same does not render the proceedings void under Section 160. The proceedings are substantively valid as they are undertaken within the four corners of the CGST Act within the prescribed limitation period and in furtherance of the legislative intent of protecting government revenue.              

[Source: F.No.CBIC -20010/67/2025-GST/994 dated 16.09.2025 issued by CBIC (GST Policy Wing)]

Clarification on redemption of Advance Authorizations

Directorate General of Foreign Trade, Department of Commerce, Ministry of Commerce & Industry has issued a Policy Circular for clarification on Redemption of Advance Authorizations impacted by Erstwhile Rule 96(10) of the CGST Rules and imports effected between October 13, 2017 to January 09, 2019.

• Rule 96(10) prior to its amendment, restricted the refund of IGST paid on experts in cases where the exporter or its supplier had availed specified duty exemptions, such as those under Customs Notification No. 79/2017-Customs for imports effected between October 13, 2017 to January 09, 2019.
• It has been clarified that the Export Obligation Discharge Certificate (EODC) shall not be withheld, provided all other requirements are duly fulfilled, in the following cases:
  • Payment of IGST in Cash: Where IGST has been paid in cash at the time of clearance of import consignments under the AA Scheme during the period October 13, 2017 to January 09, 2019.
  • Non-Availing of Duty Exemptions: Where the applicant has not availed exemption from IGST. Compensation Cess or other levies (except Basic Customs Duty).
  • Compliance with Pre-Import Condition: Where the applicant has complied with the prescribed pre-import and other procedural requirements under the scheme.

(Source: Policy Circular No. 07/2025-26 dated 11.11.2025 issued by Directorate General of Foreign Trade,  Department of Commerce, Ministry of Commerce & Industry)

GSTN Advisory for Furnishing of Bank Account Details

• GSTN has issued an Advisory for Furnishing of Bank Account Details as per Rule 10A of CGST Act, 2017.
• As per Rule 10A, taxpayers (except those registered under TCS, TDS, or suo-moto registrations) must furnish their bank account details within 30 days of grant of registration or before filing details of outward supplies in GSTR-1 or IFF, whichever is earlier.
• It has been advised that the changes with respect to Rule 10A will be implemented on the GST Portal soon. Therefore, the taxpayers who have not yet furnished the bank account details till date are advised to update the same at the earliest to avoid suspension of their GST Registration and disruption of business activities.
• Bank account details can be added through a non-core amendment by navigating to:
  Services > Registration > Amendment of Registration Non-Core Fields.

(Source: GSTN Advisory dated 20.11.2025)

CESTAT date for uploading pending appeals

• CESTAT has issued an Order dated 18.11.2025 whereby it has set 31st January, 2026 as the new deadline for uploading all pending appeals.
• CESTAT has directed the Deputy Registrar and Assistant Registrar of respective benches to ensure that all the appeals are uploaded and made available online for the purpose of hearing by e-court by the respective registry.
• Detailed guidelines to follow.

  (Source: CESTAT Order F.No. 01(05)/Circular/CESTAT/2025 dated 18.11.2025

issued by Cestat New Delhi)