Indirect Tax News Letter- October 2025

 

GST Calendar –Compliances for the month of October ’2025

 

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

 

Accommodation provided in course of employment—GST & ITC implications clarified”

Case: Suzuki Motor Gujarat Pvt. Ltd. (AAR Gujarat)

Background & Facts

Applicant manufactures passenger cars and parts.As part of its company policy, the applicant provides dormitory accommodation near its factory to permanent employees (optional) and student-trainees (mandatory).Accommodation is arranged through a third-party accommodation service provider (“ASP”) which invoices the applicant and charges GST @ 18 %. The Applicant recovers a nominal amount from employees/trainees for the accommodation facility. 

• For employees, the facility is optional and family members are not covered.
• Key questions raised with the AAR:
  1. Whether GST is liable on the amount recovered from employees for the accommodation? 
  2. Whether GST is liable on the amount recovered from student-trainees for the accommodation? 
  3. Whether the Applicant is eligible to avail Input Tax Credit (ITC) on the GST paid by the ASP for accommodation to employees? 
  4. Whether ITC is available on GST paid by the ASP for accommodation to student-trainees?

Ruling / Held

• GST on employees’ recoveries: The AAR held that no GST is leviable on the nominal amount recovered from permanent employees for the dormitory accommodation. The reasoning: the accommodation is a perquisite provided in the employment contract/policy; hence it does not qualify as a “supply” under Section 7 of the CGST Act, 2017. 
• GST on trainees’ recoveries: The AAR held that GST is leviable on the amount recovered from student-trainees, since they are not on the payroll and the accommodation cannot be treated as a perquisite in an employment relationship; thus the facility constitutes a supply in the course of business. 
• ITC on employees’ accommodation: The AAR held that the Applicant is eligible to claim ITC on the GST paid to the ASP for the accommodation of permanent employees. ITC is not blocked under Section 17(5) because the service does not fall under the blocked categories; however, the ITC must be restricted to the extent of cost borne by the Applicant (i.e., the portion recovered from employees is excluded). 
• ITC on trainees’ accommodation: The AAR also held that ITC is available in respect of the GST paid for the accommodation provided to student-trainees, since the Applicant bears the cost (including deduction from trainees) and the outward supply (to trainees) is taxable. 

RNM Comments

This ruling provides clear guidance for entities providing dormitory/accommodation facilities to employees and/or trainees through third-party service providers.

• The distinction between employees vs trainees/contract persons is critical for GST liability and ITC eligibility:
  • For employees (under employment contract), the facility can be treated as a perquisite and hence not subject to GST.
  • For trainees or persons not in employment contract/payroll, the facility is a supply and GST applies.
• On ITC, the ruling is employer-friendly: as long as the inward supply is for business purposes and the benefit is ultimately for the employer, ITC is available—even if the service is provided to employees. The restriction of Section 17(5)(g) (services for personal consumption) was held not applicable.
• Practical “take-aways” for your client scenarios:

1. If your client offers accommodation to its employees under employment contracts, ensure the policy supports that the facility is part of employment terms (to claim non-supply status).
2. If accommodation is also offered to trainees, contract staff, apprentices, etc., treat it as taxable supply: ensure GST is discharged and corresponding ITC aspects are handled.
3. When claiming ITC for such accommodation facilities, ensure the cost borne by the employer is clearly identified and recoveries from employees are excluded from the basis of ITC.
4. Review agreements with third-party service providers to clearly document supply chain and invoicing (ASP to employer).

• Note: While the ruling is from Gujarat AAR (and thus binding on the Applicant and persuasive elsewhere), you should evaluate whether your state has analogous AAR/AAAR jurisprudence or whether your scenario aligns in facts with this case (especially optional vs mandatory facility, employee vs non-employee distinction).
• For your litigation/advisory purposes (in GST SCNs for works contracts etc), you may highlight this decision as supporting the proposition that employer-employee perquisites may not constitute supply and thus outside GST levy—as long as the facts align.

 

Rule 112 of CGST Rules can be Invoked to Allow Additional Evidence when Adequate Opportunity was not Given by Adjudicating Authority- Kerala High Court

U.S. Technology International Pvt. Ltd. vs. State of Kerala and Ors

 

Background

The Kerala High Court in a recent judgment in U.S. Technology International Pvt. Ltd. vs. State of Kerala and Ors. [TS-866-HC(KER)-2025-GST] examined whether the Appellate Authority under the CGST Act, 2017 can invoke Rule 112 of the CGST Rules, 2017 to permit a taxpayer to furnish additional evidence/documents that could not be produced before the adjudicating authority due to lack of sufficient time or opportunity. This ruling reiterates the importance of procedural fairness and the principles of natural justice in GST adjudication proceedings.

Facts of the Case

The adjudicating authority issued a show cause notice (SCN) granting the taxpayer 30 days to file a reply. However, a personal hearing was scheduled before the expiry of the 30-day reply period, leaving the taxpayer with inadequate time to prepare and furnish supporting documents. Despite requesting more time, the adjudicating authority proceeded to pass the order without considering the additional documents offered later by the taxpayer. Before the Appellate Authority, the taxpayer sought permission to submit the same documents as additional evidence, relying on Rule 112(1)(c) of the CGST Rules. The appellate authority, however, rejected the request, stating that such documents could not be entertained at the appeal stage.

Held

The Kerala High Court set aside the appellate order and made the following key observations: Violation of natural justice, Although 30 days were granted to file the reply, fixing a hearing before the expiry of that period deprived the taxpayer of an effective opportunity to present its case. A hearing can only be scheduled after the expiry of the reply period; otherwise, such opportunity cannot be treated as proper compliance with natural justice. Invocation of Rule 112(1)(c): The Court held that Rule 112(1)(c) permits the appellate authority to accept additional evidence/documents if the taxpayer was prevented by sufficient cause from producing them before the adjudicating authority. The taxpayer’s failure to produce the documents earlier was justified due to the limited time granted and therefore constituted a “sufficient cause.” Appellate leniency under GST: Since the GST appellate framework prohibits remand of cases back to the adjudicating authority, appellate authorities must adopt a liberal and pragmatic approach when admitting additional evidence to ensure justice. Direction of the Court: The appellate authority’s order was quashed and set aside. The authority was directed to accept the additional documents, reconsider the appeal afresh on merits, and pass a speaking order after granting proper opportunity of hearing.

RNM Comments

• The judgment reinforces the judiciary’s emphasis on substantive justice over procedural rigidity.
• Where adjudicating authorities fail to grant adequate time or fair opportunity for document submission, appellate authorities are duty-bound to admit additional evidence under Rule 112(1)(c).
• Taxpayers should document all requests for adjournment or extension to establish bona fide reasons for delayed submission of evidence.
• Practically, this ruling offers a safeguard in cases where orders are passed prematurely or without full consideration of evidence, ensuring that such lapses can be rectified at the appellate stage.
• For ongoing GST litigation, taxpayers may rely on this decision to seek admission of supporting documentation where time constraints or procedural lapses hindered submission before adjudication.

 

Supreme Court Upholds ITC Benefit Despite Seller’s Default in VAT Payment

Background

In a landmark judgment, the Supreme Court of India has reaffirmed that Input Tax Credit (ITC) cannot be denied to a bona fide purchasing dealer merely because the selling dealer failed to deposit VAT collected with the government. The decision arose under the Delhi Value Added Tax Act, 2004 (DVAT Act) in the case of Shanti Kiran India Pvt. Ltd. vs. Commissioner of Trade & Taxes, Delhi [Supreme Court, Civil Appeal Nos. 2042–2047/2015, decided on 9 October 2025]. This ruling upholds the Delhi High Court’s judgment, aligning with the principle that law cannot compel the impossible—a buyer cannot be held responsible for the seller’s post-sale default. 

Facts of the Case

The assessee purchased taxable goods from registered dealers within Delhi, paid VAT as part of the purchase price, and claimed ITC under Section 9(1) of the DVAT Act. All purchases were supported by valid tax invoices and bank payments, and suppliers were registered with valid TINs at the time of supply. The VAT Department later disallowed ITC on the ground that some suppliers failed to remit the VAT or their registrations were cancelled post-transaction, invoking Section 9(2)(g) of the DVAT Act. Despite the genuineness of transactions, the department raised demands with interest and penalty, which were upheld in appeal, prompting writ proceedings before the Delhi High Court.

Held – Supreme Court (affirming Delhi HC)

• Bonafide Purchaser Protection:
  The Court held that once a purchasing dealer establishes that goods were bought from a registered seller, invoices were genuine, and tax was paid, ITC cannot be denied solely because the seller defaulted in depositing VAT.
• Interpretation of Section 9(2)(g):
  The Court approved the Delhi HC’s purposive reading of Section 9(2)(g), observing that there is no statutory mechanism for purchasers to verify whether the seller has deposited VAT. A literal reading would make compliance impossible and defeat the purpose of the VAT credit chain.
• Remedy Against Defaulting Seller:
  The department’s recourse lies against the defaulting seller, not against the bona fide purchaser.
• Fraud or Collusion Exception:
  ITC can only be denied if evidence shows collusion or fraudulent conduct between buyer and seller; mere non-deposit of tax by the seller is insufficient.
• Confirmation of Delhi HC View:
  The Court cited On Quest Merchandising India Pvt. Ltd. and reaffirmed that this interpretation now forms the settled position of law under the DVAT framework.

RNM Comments

This decision reinforces the sanctity of the input credit chain and ensures that compliant taxpayers are not penalised for a supplier’s independent default. The judgment is particularly relevant under the GST regime, where similar disputes continue under Section 16 of the CGST Act—notably the “supplier-compliance” conditions linked to GSTR-2A/2B mismatch cases. Courts (e.g., DY Beathel Enterprises – Madras HC; Suncraft Energy – Calcutta HC) have similarly safeguarded bona fide recipients, while others (e.g., Aastha Enterprises – Patna HC; R.V. Enterprises – Gujarat HC) have upheld reversals in supplier-default scenarios. This Supreme Court ruling will serve as persuasive guidance in GST matters, emphasising that ITC should not be denied when purchases are genuine and tax has been paid to a registered supplier. Practically, taxpayers should maintain robust documentary evidence—including invoices, e-way bills, and proof of payment—to demonstrate transaction genuineness and protect credit claims.

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