Indirect Tax News Letter December 2025

Indirect Tax News Letter

GST Calendar –Compliances for the month of December ’2025

Nature of Compliances	Due Date
GSTR-7 (Tax Deducted at Source ‘TDS’)	January 10, 2026
GSTR-8 (Tax Collected at Source ‘TCS’)	January 10, 2026
GSTR-1	January 11, 2026
IFF- Invoice furnishing facility (Availing QRMP)	January 13, 2026
GSTR-6 Input Service Distributor	January 13, 2026
GSTR-2B (Auto Generated Statement)	January 14, 2026
GSTR-3B	January 20, 2026
GSTR-5 (Non-Resident Taxable Person)	January 20, 2026
GSTR-5A (OIDAR Service Provider)	January 20, 2026
PMT-06 (who have opted for QRMP scheme)	January 25, 2026

 

GST Update – December 2025 

GST, Export-related GST implications, Customs & Indirect Taxes

 

December 2025 witnessed important indirect tax developments impacting exporters, SEZ units, valuation principles, jurisdictional overlap between Central and State authorities, and digitization of customs processes. Judicial scrutiny during the month continued to reinforce statutory discipline, transactional valuation, and procedural fairness, while regulatory changes provided tangible relief in export-related compliance.

1. FEMA Timeline Extensions 

The Reserve Bank of India has amended FEMA regulations to extend:

• The time limit for realization and repatriation of export proceeds from 9 months to 15 months

• The permissible period for shipment of goods against advance receipts from 1 year to 3 years

GST Implications

These extensions have a direct bearing on GST compliance, particularly in the following areas:

• Export of Services:

Since GST law does not prescribe an independent timeline for receipt of consideration, FEMA timelines are determinative. The extended 15-month period strengthens exporters’ ability to establish export status even where remittances are delayed.

• Exports under LUT (Rule 96A):

The requirement to realize export proceeds within one year or within the period permitted under FEMA is now substantially relaxed. This reduces the immediate risk of IGST demand with interest merely due to delayed realization.

• Refund Recovery (Rule 96B):

Refunds already sanctioned are recoverable only if FEMA timelines are breached. The extension effectively postpones refund recovery exposure and improves cash flow certainty for exporters.

2. Goods and Services Tax – Key Judicial Pronouncements

a. Cross-LoC Trade Held to be Intra-State Supply

The Jammu & Kashmir High Court held that trade conducted across the Line of Control constitutes intra-state supply for GST purposes. The Court emphasized that:

• Legal territorial sovereignty prevails over administrative or de facto control
• Both the supplier and place of supply continue to fall within the same State/UT

The Court also upheld the validity of composite SCNs covering multiple financial years, provided:

• Year-wise quantification is available
• Limitation is independently satisfied for each period
• Allegations are clearly articulated

b. Refund of ISD-Distributed ITC Allowed to SEZ Units

The Gujarat High Court reaffirmed that:

• SEZ units are entitled to refund of unutilized ITC distributed through ISD

• Refund eligibility cannot be denied on the ground that ITC originates centrally rather than from direct suppliers

The Court recognized the commercial impracticality of suppliers claiming refunds in ISD structures and held that refund entitlement follows the zero-rated supply, not the source of credit.

c. Constitutional Challenge to 180-Day ITC Reversal Rule

The Gujarat High Court issued notice in a writ petition challenging the validity of:

• Mandatory ITC reversal (along with interest) where payment to suppliers is not made within 180 days

The challenge argues that:

• The provision interferes with legitimate commercial credit arrangements
• It indirectly regulates trade terms without legislative competence
• It violates constitutional guarantees under Articles 14 and 19(1)(g)

d. MRP-Based Compensation Cess Struck Down

The Karnataka High Court invalidated notifications mandating levy of compensation cess based on MRP instead of transaction value for specified tobacco products.

The Court held that:

• Section 15 valuation principles apply wherever cess is levied on value
• Delegated legislation cannot override the parent statute
• MRP is a notional construct and cannot replace actual consideration

e. Central Proceedings Valid Despite Prior State Action

The Chhattisgarh High Court clarified the scope of Section 6(2)(b) and held that:

• Mere issuance of notices by State authorities does not bar Central proceedings
• Only proceedings culminating in adjudication or demand qualify as “proceedings” under the Act

Where State action is abandoned or closed without adjudication, Central authorities retain full jurisdiction to proceed.

3. Customs & Trade Facilitation – Digitalization Initiatives

The CBIC has launched a fully digital ICEGATE 2.0 platform for approvals under:

• Manufacture and Other Operations in Warehouse Regulations (MOOWR)
• Manufacture and Other Operations in Special Warehouse Regulations (MOOSWR)

The platform replaces manual and hybrid processes and aims to:

• Ensure end-to-end online processing
• Improve transparency and audit trails
• Reduce processing timelines and administrative discretion

Case Laws

SHREE ARIHANT OIL AND GENERAL MILLS v. UNION OF INDIA & ORS.

2025 – Rajasthan High Court

Issue

Whether the GST authorities were justified in initiating adjudication proceedings and passing orders without properly considering the taxpayer’s replies and without adhering to the principles of natural justice, particularly the requirement of a meaningful opportunity of hearing.

Facts

The petitioner was subjected to GST proceedings pursuant to issuance of a Show Cause Notice. Detailed written submissions were filed by the petitioner disputing the allegations on facts and law. However, the adjudicating authority proceeded to pass the order without dealing with the petitioner’s submissions in a reasoned manner and without granting an effective opportunity to rebut the allegations. The petitioner challenged the order on the ground of procedural arbitrariness and violation of natural justice.

Held

The Court held that mere issuance of notice and receipt of reply does not satisfy the requirement of natural justice. An adjudication order must demonstrate application of mind and must deal with the contentions raised by the assesse. Since the impugned order was passed mechanically, without proper consideration of the reply, it was set aside and the matter was remanded for fresh adjudication after granting a meaningful opportunity of hearing.

SHARMA TRADING COMPANY v. UNION OF INDIA

(Delhi High Court, Dec 2025)

Issue

Whether GST proceedings are sustainable when the Show Cause Notice and adjudication order are passed in a mechanical manner, without proper consideration of the assessee’s reply and without granting an effective personal hearing, thereby violating the principles of natural justice.

Facts

The petitioner was issued a GST Show Cause Notice proposing tax, interest, and penalty. The petitioner submitted a detailed written reply, contesting the demand on facts and law. Despite the reply, the adjudicating authority proceeded to pass the order without discussing or dealing with the submissions made, and without granting a meaningful opportunity of personal hearing. Aggrieved by the non-speaking order and procedural lapses, the petitioner approached the High Court.

Held

The Court held that adjudication under GST cannot be reduced to a mere formality. Authorities are duty-bound to apply their mind to the reply, pass a reasoned order, and grant a meaningful opportunity of hearing, especially where civil consequences follow. Since the impugned order was passed in violation of natural justice and without proper reasoning, the Court set aside the order and remanded the matter for fresh adjudication in accordance with law.