RECENT DEVELOPMENTS IN GOODS AND SERVICES TAX

The United Nations Department of Economic & Social Affairs (UN-DESA) has predicted that India’s economic growth is likely to grow @ 6.6% in FY 2027 and @ 6.8% in FY 2028 supported by resilient consumption recent taxation reforms and strong public investment. This may also offset the adverse impact of US tariffs.

The Budget session of Parliament will be convened in two parts from 28th January to April 2, 2026 with recess from 13th February, 2026 to 9th March, 2026. The Budget is likely to be presented this year on Sunday, 1st February, 2026. While major direct tax reforms have been initiated on Income Tax Act, 2025 and Major GST reforms acted upon, it is likely that there may not be much on taxation front but Budget may cover economic policies and financial management, investments etc.

For the Union Budget- 2026-27, states have sought special assistance from centre for capital investments and enhanced support to compensate for revenue loss to the recent GST tax rate cuts, during a pre-budget meeting with Finance Minister. States also pressed for more assistance against disasters and climate change and implementation of 16th Finance Commission recommendations.

The Kerala High Court has dismissed bank retirees’ petition to grant GST exemption on health insurance premiums under the IBA group policy. GST exemption is intended for individuals health insurance policies and the retirees policies are equivalent to a group policy issued based on the understanding reached between the Indian Banks Association and the insurance company, followed by collective bargaining.

CBIC has issued an advisory on fake notices being sent to taxpayers as fake summons. CBIC has asked the taxpayer to report such fraudulent notices and calls from fake officers. These fake notices are using CGST logo as well as fake document identification number (DIN) to appear to be genuine. Taxpayers have been advised to verify the correctness of DIN numbers through GSTN / CBIC portal.

GSTN has issued an advisory on filing opt-in declaration, 2025 for specified premises to be filed by persons who are applying for registration or who are already registered and supplying hotel accommodation services by declaring their premises as ‘specified premises’.

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%.

Amended to Special Valuation / Retail Sale Price for Pan Masala and Tobacco Products

CBIC vide Notification No. 19/2025-CT dated 31.12.2025 has made amendment in the Notification No. 49/2023-Central Tax dated 29.09.2023 regarding Pan Masala and Tobacco Products namely:

• In the said notification, after clause (iii), the following clause shall be inserted, namely: (iv) supply of the following 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, on which retail sale price is declared : -

TABLE

Explanation - For the purposes of this clause —

1. 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;
2. 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;
3. 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;
4. 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.
5. “tariff item”, “heading”, “sub-heading” and “Chapter” shall mean respectively a tariff item, heading, sub-heading, and Chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975);
6. the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this clause.”

• This notification shall come into force on the 1st day of February 2026.

(Source: Notification No. 19/2025-Central Tax dated 31.12.2025)

New Rule 31D notified for value of supply of goods on basis of retail sale price relating to Pan Masala & Tobacco Products

CBIC vide Notification No. 20/2025 dated 31.12.2025 inserted new Rule 31D - Value of supply of goods on basis of retail sale price for pan masala and tobacco products under below Chapter / Heading / Sub-hearing / Tariff Item:

• The amount of applicable tax referred to in sub-rule (1) shall be determined as follows:

Tax amount = (Retail sale price X tax rate in % of applicable taxes) / (100+ sum of applicable tax rate).

• A new clause (f) has been inserted in Rule 86B in the first proviso to exempt registered person other than manufacturer from the provisions of Rule 31D.

(Source: Notification No. 20/2025-Central Tax dated 31.12.2025)

Advisory on Filing Opt-In Declaration for Specified Premises, 2025

• Registered persons must file a declaration issued vide Notification No. 05/2025-CT (Rate) dated 16.01.2025 which is now made available electronically on the GSTN Portal to classify premises as specified premises.
• Annexures VII, VIII, and IX are introduced for opt-in and opt-out declarations for such premises.
• Annexure VII is for opt-in declaration for registered person
• Annexure VIII is for opt-in declaration for person applying for registration
• Annexure IX is for opt-out declaration
• The above declarations shall be filed on or after 1st of January of the preceding Financial Year but not later than 31st of March of the preceding Financial Year. (for already registered persons).
• For Financial Year 2026-27, Annexure VII can be filed from 1st January, 2026 to 31st March, 2026.
• The above declaration shall be filed within fifteen days of obtaining acknowledgement for the registration application (for new taxpayers).

(Source: GSTN Advisory dated 04.01.2026)

Health Security se National Security Cess Rules, 2026

New Rules to replace Compensation Cess have been notified by the Central Government videNotification No. 01/2026-HSNS Cess dated 01.01.2026 to be effective from 01.02.2026. Key points of the Rules are as under:

• The Rules shall be applicable on all taxable persons which means and includes any person who owns, possesses, operates, manages, or is otherwise in control of the machine or undertakes any process by which specified goods are manufactured or produced, whether directly or through job-workers, employees, hired labour, or through any other person acting on his behalf under any arrangement.
• Every taxable person who owns, possesses, leases or otherwise controls a machine installed or a process undertaken in a factory for manufacturing of pan masala and tobacco products, shall be required to register himself by submitting the Form HSNS REG-01.
• A declaration would be required under Section 9 of the Act in Form HSNS DEC-01 on the portal within seven days of the grant of registration.
• The rules propose a monthly cess on machines used to produce specified goods, primarily pan masala or any other items for which a monthly return would be required to be filed in Form HSNS RET-01 on the portal before 20th day of the succeeding month. 
• The Rules have 11 Chapters viz, preliminary, registration, declaration, payment of cess and returns, cess abatement and computation, audit, accounts and records, compounding of offences, seizure of goods and appeals and revision and miscellaneous.

(Source: Notification No. 01/2026-HSNS Cess dated 01.01.2026)