Indirect Tax News Letter February 2026
GST Calendar –Compliances for the month of February ’2026
| Nature of Compliances | Due Date |
| GSTR-7 (Tax Deducted at Source ‘TDS’) | March 10, 2026 |
| GSTR-8 (Tax Collected at Source ‘TCS’) | March 10, 2026 |
| GSTR-1 | March 11, 2026 |
| IFF- Invoice furnishing facility (Availing QRMP) | March 13, 2026 |
| GSTR-6 Input Service Distributor | March 13, 2026 |
| GSTR-2B (Auto Generated Statement) | March 14, 2026 |
| GSTR-3B | March 20, 2026 |
| GSTR-5 (Non-Resident Taxable Person) | March 20, 2026 |
| GSTR-5A (OIDAR Service Provider) | March 20, 2026 |
| PMT-06 (who have opted for QRMP scheme) | March 25, 2026 |
GST Update – January 2026
Finance Bill, 2026 – Key Indirect Tax Amendments
The Finance Bill, 2026 introduces calibrated reforms across Customs, GST and Excise laws with a focus on tariff rationalisation, export facilitation, refund liberalisation and regulatory certainty. While the median Basic Customs Duty (BCD) remains at 10%, targeted sectoral adjustments and structural amendments signal a balanced policy approach combining trade facilitation with domestic manufacturing support .
I. CUSTOMS LAW AMENDMENTS
(A) Composite Duty Introduction
From 2 February 2026, composite duties (ad valorem + specific rate) are introduced for:
- Umbrellas
- Parts and accessories of umbrellas
This measure aims to curb undervaluation and ensure minimum revenue realization .
(B) Reduction in BCD on Key Inputs (Effective 1 May 2026)
Significant rate reductions include:
- Makhana & prepared nuts: 150% → 30%
- Rare earth metals: 5% → Nil
- Silicon (99.99% purity): 5% → Nil
- Natural sands: 5% → Nil
- Coal & lignite: 5% → 2.5%
- Ammonium nitrate: 10% → 5%
The objective is to lower raw material costs and boost domestic manufacturing .
(C) New Tariff Lines Introduced
New entries include:
- Krill (frozen) – 15%
- Pecans – 30%
- Blueberries / Cranberries – 10%
- Battery separators – 5%
- Refrigerated containers – 5%
This enhances classification specificity and reduces disputes .
2. Social Welfare Surcharge (SWS)
No structural change in levy.
However, technical alignment has been undertaken to ensure SWS follows revised tariff entries .
Impact:
Businesses must evaluate effective duty incidence considering both revised BCD and continuing SWS.
3. Agriculture Infrastructure & Development Cess (AIDC)
Aircraft tyres continue to attract AIDC @ 0.5%, with technical amendment to remove reference to omitted exemption entry .
No rate change; only legal alignment.
4. Deferred Payment of Import Duty – Major Relief
- Payment cycle extended from fortnightly to monthly.
- Facility restricted to “eligible importers” based on compliance record and risk profile .
Business Impact:
- Improved liquidity
- Enhanced risk-based facilitation
- Greater compliance scrutiny
5. Baggage Rules, 2026
Baggage Rules, 2016 superseded.
Key reforms:
- Clearer temporary import/export provisions
- Restructured Transfer of Residence (ToR) eligibility
- Uniform procedures across airports .
6. Customs Act Legislative Amendments (Effective 1 April 2026)
(A) Fishing Beyond Territorial Waters
- Fish harvested beyond territorial waters can be brought duty-free.
- Fish landed at foreign ports treated as exports .
Impact:
Boost to marine exports and clarity under maritime customs jurisdiction.
(B) Advance Ruling Validity Extended
Validity increased to 5 years (earlier shorter period).
Existing rulings can be extended on request .
Impact:
Greater tax certainty in classification and valuation disputes.
(C) Inter-Warehouse Movement Simplified
Prior permission removed; subject to prescribed conditions .
Impact:
- Faster logistics
- Reduced officer interface
- Higher post-clearance audit focus
II. GST AMENDMENTS (CGST & IGST)
Effective upon enactment unless otherwise specified.
1. Post-Supply Discounts Liberalised
Requirement of invoice-level pre-agreement removed.
Credit notes allowed subject to:
- Recipient reversing corresponding ITC .
Impact:
- Reduced valuation disputes
- Greater commercial flexibility
- Possible scrutiny on genuineness
2. Provisional Refund Extended to Inverted Duty Structure
- Provisional refund benefit extended.
- Threshold for export refund claims removed .
Impact:
- Improved working capital
- Faster ITC realisation
- Increased refund compliance checks
3. Interim Appellate Mechanism for Advance Ruling
Government empowered to authorise an interim adjudicatory authority until National Appellate Authority is constituted .
Impact:
Restores appellate remedy and reduces constitutional vacuum.
4. Intermediary Services – Place of Supply Shift (Effective 1 April 2026)
Place of supply shifted to location of recipient.
Result:
- Intermediary services to foreign clients may qualify as export of services .
Impact:
- Zero-rated supply eligibility
- Refund of ITC
- Major boost for IT/BPO/consulting sector
- Increase in refund claims
This is one of the most business-friendly GST reforms in recent years.
III. CENTRAL EXCISE CHANGES
1. NCCD on Tobacco Products (Effective 1 May 2026)
Statutory rate increased from 25% to 60%,
but effective duty incidence unchanged .
Revenue neutral restructuring.
2. Exemption on Biogas/CBG in Blended CNG
Excise duty exemption now covers:
- Entire value of biogas/CBG
- GST component on such biogas .
Impact:
Promotes renewable fuel adoption.
3. Deferment of Additional Excise on Unblended Diesel
Proposed ₹2 per litre additional duty deferred till 31 March 2028 .
Impact:
Prevents immediate inflationary pressure.
IV. SECTORAL IMPACT SNAPSHOT
| Sector | Impact Summary |
|---|---|
| Exporters | Faster refunds, zero-rating benefits |
| IT/BPO | Intermediary export eligibility |
| Manufacturing | Input cost rationalisation |
| Inverted duty sectors | Provisional refund relief |
| Logistics | Easier warehousing movement |
| Fisheries | Duty-free catch beyond territorial waters |
| Retail/FMCG | Discount valuation clarity |
CASE LAW
GSTAT Clarifies: Re-Determination under Section 73 Must Be Done Only by the Proper Officer Where Section 74 Fails
M/s Sterling & Wilson Pvt. Ltd. vs. Commissioner, Odisha
Date: 20 February 2026
Forum: Goods and Services Tax Appellate Tribunal (GSTAT)
Facts
The assessee was engaged in engineering, procurement and construction (EPC) services. A Show Cause Notice (SCN) was issued under Section 74 of the CGST Act, 2017, alleging suppression and intent to evade tax due to mismatch between GSTR-1 and GSTR-3B for FY 2018-19.
- The adjudicating authority confirmed:
- Tax demand
- Interest
- Penalty under Section 74 (fraud provision)
- On appeal, the First Appellate Authority recorded a clear finding that fraud or intent to evade tax was not established.
- However, instead of remanding the matter, the appellate authority:
-
- Upheld tax and interest
- Reduced penalty
- Effectively treated the case as one falling under Section 73 (non-fraud provision)
Issue
Whether, upon holding that allegations of fraud under Section 74 are unsustainable, the Appellate Authority can itself convert the proceedings into Section 73 and determine tax liability, or whether the matter must be remanded to the proper officer for fresh adjudication under Section 73 in terms of Section 75(2) of the CGST Act.
Held
The GST Appellate Tribunal held as follows:
Section 75(2) of the CGST Act mandates that where proceedings initiated under Section 74 fail for want of fraud, the proper officer must redetermine tax as if the notice had been issued under Section 73.
The term “proper officer” refers to the original adjudicating authority, as clarified by CBIC Circular No. 254/11/2025-GST.
Therefore, the Appellate Authority does not have jurisdiction to convert and conclude the matter under Section 73.
Once fraud is not established:
- Proceedings under Section 74 cannot survive.
- The matter must be remitted back to the adjudicating authority for fresh consideration under Section 73.
The Tribunal set aside the order to the extent it converted proceedings under Section 73.
However, it upheld the finding that the case did not fall under Section 74.
The matter was remanded to the proper officer for re-adjudication under Section 73 of the Act.
Legal Significance
Reinforces jurisdictional discipline between adjudicating and appellate authorities. Clarifies mandatory operation of Section 75(2). Confirms that penalty exposure under Section 74 cannot be sustained without establishing fraud. Establishes that appellate authorities cannot bypass statutory procedure by directly reclassifying proceedings.
RNM India’s GST Consulting Services