RECENT DEVELOPMENTS: ECONOMY AND GST

Prime Minister has opined that in 2025, India modernized institutions, simplified governance and strengthened the foundations for long term inclusive growth. 2025 can be best remembered for India’s focus on this continuous national mission. The reforms inter alia, cover sectors like nuclear power, education, insurance, labour laws and above all, GST rate rationalization which boosted consumer sentiments and demand. New trade agreements with countries paved way for investment and enterprise in India.

According to RBI’s Financial Stability Report, Indian economy is growing well but faces near term external risks. Benign inflation, fiscal consolidation and prudent macro-economic policies have enhanced economic resilience. The economy is likely to register high growth, driven by strong domestic consumption and investment.

In a preparatory exercise for forthcoming Union Budget, PM and FM met economists on the theme of ‘Aatmanirbharta and Structural Transformation: Agenda for Viksit Bharat’. The meeting noted that the unprecedented series of cross sectoral reforms in 2025 and their consideration will ensure that India continues to chart its path as one of the fastest growing economies by strengthening its foundations and unlocking newer opportunities. 2026 is likely to bring major tax and policy changes. This may include change of base year for computing GDP to 2022-23, new IIP index, income tax reforms, post GST 2.0 reforms in customs, excise and GST including custom simplification and taxation of sin goods.

At the corporate level, companies expect a better and faster growth in FY 2026 despite the uncertainties on geo- political front. With top line and bottom lines improving job opportunities may also be better in future.

The demand for consumer durables, vehicles and boost products witnessed a boost in 2025 mainly due to and after rate cuts.

During the winter session of Parliament, several questions were asked and replied to in relation to GST and compensation cess. In all, 15 questions were raised relating to structural change, administrative concerns and impact on state revenues after GST rates cut. It is projected that there may be net negative revenue impact of appropriately Rs. 47,700 crore. Further, CBIC is monitoring prices to ensure that rate reduction is passed on. Anti evasion measures and anti-fraud initiatives were also discussed along with possibility of inclusion of petroleum and alcohol products.

On GST Appellate Tribunal (GSTAT) front, two important developments took place- one the advisory issued in September, 2025 on staggered filing of appeals before GSTAT was withdrawn and two, judicial and technical members were posted to different benches of Tribunal who have been asked to join on 21st January, 2026.

Automobile dealers body, FADA has moved to Supreme Court on loss of accumulated input tax credit arising from withdrawal of compensation cess. It is expected that the industry loss could be about Rs. 2500 crores. The court has issued notice to the Government.

CBIC has notified new GST rates on tobacco and tobacco products w.e.f. 01.02.2026. Also, ‘Nil’ compensation cess has  been notified w.e.f. 01.02.2026 on various products.

In Central Excise too, CBIC has notified 01.02.2026 as the date from which provisions of Central Excise (Amendment) Act, 2025 shall come into force. It  has brought chewing tobacco, jarda scented tobacco and gutkha manufactured using packing machines under a special excise duty regime as notified goods under Section 3A of the Central Excise Act, 1944. This move marks the return of a capacity-based taxation system, where duty will be levied and collected based on the number and speed of packing machines installed in a factory, rather than actual production. It has also notified the Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026, which will also take effect from February 1, 2026.

Net GST collection in December, 2025 (last month of 2025 and second full month after GST rate cuts) has increased by just 2.2% on YoY basis. This excludes compensation cess as cess is not going to continue and is being abolished. Gross GST revenue was recorded at Rs. 1.74 lakh crore against Rs. 1.64 lakh crore in December, 2024 (6% higher) and net revenue at Rs. 1.45 lakh crore against Rs. 1.42 lakh crore on December, 2024. Refunds were higher by 31% to Rs. 28,980 crore. IGST collection from imports grew by 19.7% to Rs. 52,000 crore on YoY basis. Overall, growth has been positive except net domestic revenue which recorded a negative growth of 5.1%.

It is learnt that GST Council may meet soon to discuss GST rates on water purifiers and air purifiers in view of strong demand from several quarters.

GST rates on tobacco and tobacco products [Amendment to Notification No. 09/2025-CT (R) dated 17.09.2025]

• The Central Government on the recommendation of the GST council, has amended the Notification No. 09/2025-CT (R) dated 17th Sep 2025videNotification No. 19/2025- CT (Rate) dated 31st Dec 2025, thereby inserting certain new entries in the said Notification, which are as follows:

1. In Schedule II, which prescribes  a GST rate of 9% in respect of goods specified therein, after S. No. 4 and the entries relating thereto, a new entry No. 4A shall be inserted, as follows:

1. In Schedule III, which prescribes a GST rate of 20% in respect of goods specified therein,  after S. No. 13 and the entries relating thereto, the following serial numbers and entries shall be inserted, namely:

1. Further, Schedule VII, which prescribes a GST rate of 14% in respect of goods specified therein, has been omitted.

• The above changes are effective from 01.02.2026.

[Source: Notification No. 19/2025-CT (Rate) dated 31.12.2025]

Rate of Compensation Cess reduced to NIL [Amendment to Notification No. 01/2017 Compensation Cess (R) dated 28.06.2017]

• The Central Government has amended Notification No. 01/2017-Compensation Cess (R) dated 28.06.2017.
• A new list has been introduced specifying various goods on which the rate of Compensation Cess has been reduced to ‘Nil’, i.e., there will be no compensation cess levy these items.
• This notification shall come into force from 01.02.2026.

[Source: Notification No. 03/2025-Compensation Cess (Rate) dated 31.12.2025]

GSTAT: No more staggered filing of appeals

• GST Appellate Tribunal (GSTAT) has revoked its Order No. 125/2025-26/1499-1502 dated 24.09.2025 which mandated filing of appeals against orders passed under section 107 and 108 of the Act before GSTAT under section 112 of the CGST Act, 2017, on a ‘staggered basis’ as per schedule therein.
• GSTAT has decided (as per new Order by President of GSTAT) to dispense with ‘staggered filing’ protocol as per earlier Order.
• This has been decided after consideration of current assessment of portal’s capabilities to promote unhindered access while preserving system efficacy i.e. free and unhindered appeal filing as allowed.
• The earlier Order dated 24.09.2025 shall stand revoked w.e.f. 18.12.2025.
• The said revocation shall not impugn the validity of appeals lodged prior to 18.12.2025 i.e., appeals filed before 18.12.2025 shall remain valid.
• The revocation Order has been issued under powers in Rule 123 of GSTAT (Procedure) Rules, 2025 and powers of GSTAT under section 112 of the CGST Act, 2017.
• The Order is issued by President of GSTAT.

[Source: GSTAT Order No. 315/2025 dated 16.12.2025

(F. No. GSTAT/Pr.Bench/Portal/125/25-26/2367-70 issued by GSTAT]      

Allotment of Benches to Technical and Judicial Members of GSTAT

• Central Government has issued an Office Order allocating Benches to the appointed Members of the GST Appellate Tribunal (GSTAT), including 28 Technical Members (Centre), 6 Technical Members (State), and 49 Judicial Members, and specifying their respective places of posting at various benches across the country.
• The allocation has been made with the approval of the Competent Authority and with bench-wise postings of 83 appointed members so far.
• All members have been directed to assume charge at their respective Benches on 21.01.2026.
• It is learnt that states have been asked to expedite the provision of court rooms and office space so that hearings can begin.
• With the bench allocation and members joining on 21.01.2026, it is expected that GSTAT benches may start hearing soon thereafter, may be before Budget 2026-27.

[Source: Office Order No. 03/2025 dated 26.12.2025,

A-50050/99/2018-CESTAT-DOR-DOR-Part (3)

issued by Department of Revenue, Ministry of Finance]

Advisory & FAQs on Electronic Credit Reversal and Re-claimed Statement & RCM Liability/ITC Statement

• GSTN has issued an Advisory and FAQs on Electronic Credit Reversal and Re-claimed Statement & RCM Liability/ITC Statement.
• Electronic credit reversal and re-claimed statement (re-claim ledger)  can be viewed by the taxpayer by navigating to the Dashboard › Services › Ledger › Electronic Credit Reversal and Re-claimed.
• RCM Liability/ITC Statement can be accessed through: Services >> Ledger >> RCM Liability/ITC Statement.
• GSTN has advised that shortly, negative values or availment of excess ITC over and above available balance, shall not be allowed in both the ledgers. Both the statements shall have following validation for regulation of ITC:

1. The reclaimed ITC in Table 4(D)(1) shall be lesser than or equal to the combined values of closing balance of Electronic Credit Reversal and Re-claimed Statement and ITC being reversed in Table 4(B)(2) of current period GSTR-3B. and,
2. The RCM ITC claimed in Table 4(A)2 & 4(A)3 shall be equal to or less than the combined values of RCM liabilities paid in Table 3.1(d) of the same GSTR-3B and closing balance of RCM Liability/ITC Statement.

• Where taxpayers already have a negative closing balance in Electronic Credit Reversal and Re-claimed Statement or RCM Liability/ITC Statement, the system will not allow such taxpayers to file their GSTR-3B until:

1. Mandatorily reversal of such excess claimed ITC (Negative closing balance) as per Electronic Credit Reversal and Re-claimed Statement is made in Table 4(B)(2) of current period GSTR-3B. In case there is no ITC available in current period, this reversal declared in table 4(B)2 will be added to the liability of the taxpayer in current period while filing GSTR-3B.
2. For negative balance in RCM Liability/ITC Statement, taxpayer need to either pay the additional RCM liability equivalent to negative closing balance in Table 3.1(d) or reduce the ITC claimed in Table 4A(2) or 4A(3) to the extent of closing balance in the current return period.

• GSTN has also issued six FAQs in respect of Electronic Credit Reversal and Reclaimed Statement and RCM Liability / ITC statement, which may be referred to.

(Source: GSTN Advisory dated 29.12.2025)

GST Collection in December, 2025

• Gross GST collection in December, 2025 is Rs. 1.74 lakh crore against Rs. 1.64 lakh crore (growth of 6.1%) on YoY basis.
• Net GST revenue rose by 2.2% only from Rs. 1.44 lakh crore to Rs. 1.46 lakh crore
• IGST from Imports showed a rise of 19.7% and was at Rs. 52,000 crore
• Net Customs revenue stood at 41,000 crore recording a growth of 26.8% on YoY basis.
• Total refunds were recorded at Rs. 28,980 crore, up from Rs. 22,138 crore, with a rise of 30.9 % on YoY basis.
• Net GST Compensation Cess in December, 2025 is Rs. 4,238 crore only.
• GST collection in States was modest with states like Uttar Pradesh indicating a negative growth of just one percent and Haryana showing a growth of 21% while Maharashtra reflected 13% growth.

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