Indirect Tax News Letter January 2026

GST Calendar –Compliances for the month of January ’2026

 

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

 

GST Update – January 2026

Non-Leviability of GST on Assignment of Leasehold Rights: Bombay High Court

This update highlights a recent decision of the Bombay High Court examining whether Goods and Services Tax (GST) can be levied on the assignment of leasehold interests in an industrial property.

In the present matter, the petitioner was allotted an industrial plot under a long-term lease of 95 years. With the requisite consent of the lessor, the petitioner transferred its leasehold interest to a third party for consideration. The tax authorities sought to subject the transaction to GST by issuing a show cause notice, classifying the assignment as a taxable supply of services under Section 7(1) read with Schedule II of the Central Goods and Services Tax Act, 2017. Challenging the proposed levy, the petitioner approached the Nagpur Bench of the Bombay High Court by way of a writ petition.

Findings of the High Court

• The Court examined clause 2(b) of Schedule II to the CGST Act, which deems leasing or letting of immovable property for business or commercial purposes to be a supply of services. It held that the impugned transaction was not in the nature of leasing or sub-leasing, but rather a one-time assignment of existing leasehold rights.
• The Court further noted that for a transaction to qualify as a “supply” under Section 7(1), it must be carried out in the course or furtherance of business. In the present case, the assignment represented a transfer of rights incidental to immovable property and lacked any direct or proximate connection with the petitioner’s business activities.
• Reliance was placed on the earlier ruling of the Gujarat High Court in Gujarat Chamber of Commerce and Industry, wherein it was held that assignment of leasehold rights constitutes a transfer of benefits arising from immovable property and does not fall within the ambit of taxable supply under GST.
• Concurring with the said view, the Bombay High Court observed that the Gujarat High Court’s decision continues to bind the departmental authorities unless overturned or dissented from by another High Court of coordinate jurisdiction.

On the basis of the above reasoning, the High Court allowed the writ petition and annulled the show cause notice issued by the Revenue authorities.

Supreme Court on Taxability of Shares Received on Amalgamation 

Facts

The taxpayers (investment entities of a business group) held shares of group companies. These shares were shown in their books as investments, though the tax department claimed they were held as stock-in-trade.
Under a court-approved scheme of amalgamation, one company merged into another, and shareholders received shares of the amalgamated company in exchange for their old shares. The tax department treated the receipt of new shares as taxable business income, while the taxpayers argued that no real income had arisen merely on receiving shares.

Issue

Whether shares received by a shareholder on amalgamation, in exchange for shares held as stock-in-trade, result in taxable business income at the time of amalgamation, even when the shares are not immediately saleable or capable of being valued in money terms.

Held

The Supreme Court held that taxability depends on the nature of holding and real income.

• If the shares were held as capital assets, the transfer on amalgamation is exempt under the Income Tax Act.
• If the shares were held as stock-in-trade, tax can arise only if the shares received represent real, commercially realizable income—that is, they must have a definite value and be capable of being sold immediately.
  Where the shares received are subject to lock-in, are unlisted, or cannot be readily sold, no real income arises at that stage, and taxation is deferred until actual sale.

 

Supreme Court: No Customs Duty on Electricity Supplied from SEZ to DTA 

Facts

Adani Power Ltd. set up a thermal power generation unit within the Mundra Special Economic Zone (SEZ) and supplied electricity to buyers located in the Domestic Tariff Area (DTA). At the relevant time, customs duty exemption was available under Notification No. 21/2002-Cus.

In 2010, the Central Government retrospectively amended the exemption framework by issuing Notification No. 25/2010-Cus, attempting to impose customs duty on electricity cleared from SEZ to DTA. For a later period (16 September 2010 to 15 February 2016), Adani Power paid per-unit customs duty under subsequent notifications and thereafter claimed a refund.

In 2015, the Gujarat High Court held that customs duty could not be levied on electricity supplied from SEZ to DTA, as there was no valid charging provision under the Customs Act. Despite this, the tax authorities continued to demand duty under later notifications. In 2019, a division bench of the Gujarat High Court declined refund, holding that the 2015 ruling was limited to an earlier notification and period. Aggrieved, the assessee approached the Supreme Court.

Issue

Whether electricity supplied from a SEZ unit to the Domestic Tariff Area can be subjected to customs duty through exemption notifications, despite the absence of a valid charging provision under the Customs Act, and whether refunds can be denied merely because subsequent notifications were not separately challenged.

Held

The Supreme Court ruled decisively in favour of the assessee and held that customs duty is not leviable on electricity supplied from SEZ to DTA. The Court observed that:

• Customs duty under Section 12 of the Customs Act can be levied only on goods imported into India from outside India. Electricity generated within India and supplied from a SEZ to DTA does not constitute an “import”.
• Section 25 of the Customs Act empowers the Government only to grant exemptions and cannot be used as a tool to impose or revive a tax levy. Notifications attempting to impose duty through the exemption route were therefore beyond delegated authority.
• The 2015 Gujarat High Court judgment struck down the very foundation of the levy for lack of legislative competence and was not confined to a specific notification or time period.
• Subsequent notifications merely altering rates could not cure the absence of a charging provision, nor could they revive an unconstitutional levy.
• A coordinate bench of the High Court was bound by the earlier declaration of law and erred in refusing relief on the ground that later notifications were not independently challenged.

Accordingly, the Supreme Court set aside the 2019 Gujarat High Court judgment and directed refund of customs duty collected for the period 16 September 2010 to 15 February 2016, holding that the amounts were collected without authority of law.

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