Indirect Tax News Letter

GST Calendar –Compliances for the month of September ’2025

 

Nature of Compliances	Due Date
GSTR-7 (Tax Deducted at Source ‘TDS’)	October 10, 2025
GSTR-8 (Tax Collected at Source ‘TCS’)	October 10, 2025
GSTR-1	October 11, 2025
IFF- Invoice furnishing facility (Availing QRMP)	October 13, 2025
GSTR-6 Input Service Distributor	October 13, 2025
GSTR-2B (Auto Generated Statement)	October 14, 2025
GSTR-3B	October 20, 2025
GSTR-5 (Non-Resident Taxable Person)	October 20, 2025
GSTR-5A (OIDAR Service Provider)	October 20, 2025
PMT-06 (who have opted for QRMP scheme)	October 25, 2025

 

Consolidated GST Council Meeting Highlights – 56th Meetings

 Rate Rationalization & Tax Structure Changes

•  Two-Slab GST Framework
• The Council recommended replacing the existing four-tier structure (5%, 12%, 18%, 28%) with a simplified two-rate structure:

• 5% – Merit Rate
• 18% – Standard Rate
• A separate 40% GST + Compensation Cess rate introduced for sin/luxury goods such as tobacco, pan masala, and aerated beverages.

Notifications to be issued under Section 9(1) of the CGST Act, 2017 read with Section 5 of the IGST Act, 2017 for implementation. 

Exemptions & Concessions

• Life & Health Insurance Premiums: Individual life and health insurance exempted from GST via amendments under Section 11(1) of the CGST Act.
• Essential Goods: UHT milk and dairy products (HSN 0401 & 0402) moved to lower slabs to reduce consumer burden
• Education Sector: Supply of educational stationery (HSN 4901) and maps shifted to Nil Rate through amendments to Notification No. 2/2017–Central Tax (Rate).

HSN-wise Rate Changes

HSN Code	Description	Old Rate	New Rate	Legal Basis
0401	UHT Milk	5%	Nil	Sec. 9 CGST Act + Notification 2/2017-CTR
0402	Butter, Ghee, Paneer	12%	5%	Notification 1/2017-CTR
4901	Educational Stationery, Maps	5%	Nil	Notification 2/2017-CTR
2402	Tobacco & Pan Masala	28% + Cess	40% + Cess	Sec. 8 GST Comp. Cess Act + Notif. 3/2019-CT
8528	Television Sets >32 Inches	28%	18%	Notification 1/2017-CTR
9963	Hotel Rooms ≤ ₹7,500	12%	5% (No ITC)	Notif. 11/2017-CTR as amended

 

CBIC has issues SOP for scrutiny of GST returns for FY 2019-20 onwards to ensure a systematic and efficient process

The GST Council in its 56th Meeting recommended significant procedural reforms to simplify compliance, reduce litigation, and improve ease of doing business. The reforms, backed by amendments under the CGST Act, IGST Act, and CGST Rules, are summarized below:

• Auto-Refund Mechanism
• Rule 89 of CGST Rules, 2017 to be amended for the automation of refund sanctioning process in cases involving:

• Inverted Duty Structure (where the tax rate on inputs exceeds the tax rate on outputs).
• Export of goods and services under zero-rated supplies.
• System-based processing to replace manual verification for refund claims up to a prescribed limit, thereby reducing human intervention and time delays.

• The system will enable real-time tracking of refund status and automatic credit into the taxpayer’s bank account upon verification of return data in GSTR-1, GSTR-2B, and GSTR-3B.
• Proposed amendment aligns with Section 54 of CGST Act for time-bound refunds.

 Prefilled GSTR-3B Returns

• Based on data from outward supplies (GSTR-1) and auto-drafted ITC statements GSTR-2B), the GST portal will:
• Auto-populate liability and ITC figures in GSTR-3B.

• Provide system-generated draft returns to minimize clerical errors and mismatches.

• Reduces reconciliation disputes under Section 37 (Outward Supplies) and Section 38 (Inward Supplies) of the CGST Act.

• Helps taxpayers in accurate ITC reporting and reduces interest liabilities due to under-reporting or mismatches.

Single E-Commerce Registration

• Rule 8 of CGST Rules to be amended to allow one GST registration for small e-commerce operators across multiple States/UTs.

• Objective:

• Eliminate the need for multiple GSTINs for each State, which earlier led to compliance duplication.

• Encourage small sellers and startups to expand operations pan-India under a single registration framework.

• Reporting requirements to remain State-wise in GSTR-1 for uniform tax distribution to States under Section 9(1) CGST Act read with Section 5(1) IGST Act.

Biometric Aadhaar Authentication

• Rule 8(4A) of CGST Rules to be enforced mandating biometric Aadhaar verification for all new GST registrations.

Aimed at curbing:

• Creation of fake firms used for generating bogus ITC invoices.

• Fraudulent claims under Section 16 of CGST Act leading to revenue leakage.

• Verification to be completed at Common Facilitation Centres (CFCs) before granting registration under Section 25 CGST Act.

Place of Supply Amendments for Intermediary Services

• Clarifications issued under Section 13(8)(b) of IGST Act for determination of Place of Supply in cases involving:

• Intermediary services provided to overseas clients.

• Cross-border Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) activities.

• Alignment with global practices under OECD VAT/GST Guidelines to avoid double taxation or non-taxation.

• Ensures Indian service providers to foreign clients are taxed appropriately, promoting export competitiveness.

GST on Cancer & Life-Saving Drugs

• A total of 33 life-saving drugs, including major cancer and rare disease medicines, have been granted full exemption from GST (0%) through amendments to Notification No. 2/2017–Central Tax (Rate), effective from 22nd September 2025. Additionally, the GST on all other finished formulation drugs has been uniformly reduced from 12% to 5%, while several diagnostic kits, medical devices, and individual health and life insurance premiums have also been moved to the 0–5% GST slab. These measures, aligned with Section 11(1) of the CGST Act, 2017, aim to reduce treatment costs, enhance affordability, and strengthen public health access across India.

Clarification on GST Treatment of Electricity Meter Services

• Under existing GST provisions, the supply of electricity and allied services provided by an electricity transmission or distribution utility (such as a State Electricity Board) for the transmission or distribution of electricity enjoys full exemption pursuant to relevant exemption notifications issued under Section 11(1) of the CGST Act, 2017. However, the Central Board of Indirect Taxes and Customs (CBIC), through Circular No. 34/8/2018-GST, had previously clarified that ancillary charges—including meter rent, testing fees, and similar incidental services—were subject to GST when charged separately, since they were treated as independent supplies. Recognizing that such ancillary services are intrinsically linked to and form an integral part of the principal supply of electricity, the GST Council in its recent deliberations has recommended issuing a composite supply clarification under Section 8 of the CGST Act, to ensure that when such charges are bundled with the principal supply of electricity, the entire transaction remains GST-exempt.

Prospective Inclusion of Petroleum Products under GST

• As per Section 9(2) of the Central Goods and Services Tax Act, 2017, the levy of GST on petroleum crude, high-speed diesel, motor spirit (petrol), natural gas, and aviation turbine fuel shall be applicable from a date to be notified by the Government on the recommendation of the GST Council. Until such notification is issued, these products continue to remain outside the purview of GST and are subject to existing State and Central levies including VAT, excise duty, and cesses. While no formal decision has yet been taken, there are strong indications that the GST Council may deliberate on the feasibility and potential GST rates for these petroleum products in upcoming meetings. Such inclusion would have significant implications on revenue distribution between the Centre and States, input tax credit availability for businesses, and final consumer pricing, particularly given the current state-wise variations in fuel taxation and the impact on inflationary trends.

Relief On Late ITC Claims: Section 16(5) Overrides Time Limit

M/s Rajkumar Josphine vs. The Superintendent- Madras High Court

Facts 

• The Petitioner, M/s Rajkumar Josphine, had availed Input Tax Credit (ITC) pertaining to FY 2017–18 to FY 2020–21. The Department denied the ITC solely on the ground that the GSTR-3B returns for the relevant periods were filed beyond the time limit prescribed under Section 16(4) of the CGST Act, 2017. Consequently, ITC was reversed and recovery proceedings were initiated along with interest and penalty.

 Background

• The Finance Act (No. 2), 2024 introduced sub-section (5) to Section 16 with retrospective effect. 

• This provision expressly overrides Section 16(4) for the initial years of GST implementation and permits availment of ITC for FY 2017–18 to 2020–21 where the relevant returns were filed up to 30 November 2021. 

Held

The Hon’ble Madras High Court observed that:

• Section 16(5) is a beneficial and curative provision, intended to address genuine difficulties faced by taxpayers during the nascent phase of GST implementation.

• The legislative intent behind its retrospective insertion is to ensure that taxpayers are not denied substantive ITC merely due to procedural delay in filing GSTR-3B, provided the returns were filed by November 30, 2021. 

• Consequently, any ITC reversal made solely on account of limitation under Section 16(4) for FY 2017–18 to 2020–21 cannot be sustained in law post insertion of Section 16(5).

Clarification on Tax Treatment of Secondary / Post-Sale Discounts under Goods and Services Tax

Background

• The Central Board of Indirect Taxes and Customs (CBIC) has recently issued clarifications on the GST treatment of secondary or post-sale discounts between manufacturers and their distribution partners. While intended to provide uniformity, these clarifications also signal increased scrutiny on how discounts and promotional activities are structured in agreements.

.Input Tax Credit (ITC) on Financial / Commercial Credit Notes/ Promotional Activities

• Commercial/financial credit notes issued without impacting tax liability shall not require ITC reversal by the recipient. The emphasis is on documentation clarity — credit notes must reflect genuine commercial adjustments.

• Incidental efforts (general sales push) remain outside the scope of supply.

• Contracted activities (advertising, co-branding, events) are treated as taxable services in the dealer’s hands.