GST WEEKLY UPDATE :28/2026-27 (11.10.2026) By CA Vipul Khandhar

1. GST COMPLIANCE UPDATE: GSTN Enables GSTR-9 & GSTR-9C Filing for FY 2025–26 on Portal:

Statutory Return: Form GSTR-9 (Annual Return) & Form GSTR-9C (Reconciliation Statement): Financial Year: FY 2025–26

Statutory Due Date: December 31, 2026 (Rule 80, CGST Rules, 2017)

Effective Enablement Date: October 10, 2026

STATUTORY & REGULATORY FRAMEWORK

• Section 44 of the CGST Act, 2017 read with Rule 80 of the CGST Rules, 2017: Governs the obligation and timeline to file Annual Returns and Reconciliation Statements.
• Section 16(4) of the CGST Act, 2017: Prescribes November 30, 2026, or the date of filing the annual return, whichever is earlier, as the statutory deadline for claiming eligible Input Tax Credit (ITC) for FY 2025–26.
• Notification No. 15/2025–Central Tax (dated September 17, 2025): Exempts registered persons with an aggregate turnover of up to ₹2 crore from the mandatory filing of Form GSTR-9.
• Notification Nos. 9/2025 & 15/2025–Central Tax (Rate): Revised GST rates effective September 22, 2025.

KEY HIGHLIGHTS & APPLICABILITY

1. Turnover Thresholds & Applicability

2. Technical Portal Glitch Reported

Following the portal deployment on October 10, 2026, taxpayers and practitioners reported a technical issue on the GST Common Portal. The portal displays error messages requesting taxpayers to file pending GSTR-1 and GSTR-3B returns, even for accounts where all monthly/quarterly returns for FY 2025–26 have already been filed. This glitch is currently preventing users from accessing or completing the annual return filing. An official advisory and ticket resolution from the Goods and Services Tax Network (GSTN) are awaited.

3. Critical Tax Alignment Considerations for FY 2025–26

• Section 16(4) ITC Cut-Off Date: Taxpayers must ensure all unclaimed eligible ITC relating to FY 2025–26 is availed in Form GSTR-3B filed on or before November 30, 2026. Filing GSTR-9 prior to this date will prematurely end the opportunity to claim missed ITC.
• Mid-Year Rate Changes (September 22, 2025): Because GST rate revisions came into effect mid-fiscal year on September 22, 2025 (via Notifications 9/2025 & 15/2025–CT Rate), taxpayers must perform rate-wise turnover and tax liability reconciliations between GSTR-1, GSTR-3B, and financial books.

ACTION POINTS FOR TAX PRACTITIONERS & CORPORATES

1. Reconcile GSTR-2B vs. Books: Ensure all eligible ITC for FY 2025–26 is identified and reported in the upcoming GSTR-3B returns well before November 30, 2026.
2. Rate Change Mapping: Reconcile turnover billed under the old rates (prior to Sept 22, 2025) versus new rates (post-Sept 22, 2025).
3. DRC-03 Settlement: If any tax shortfalls or excess ITC claims are identified during reconciliation, discharge the tax along with applicable interest via Form DRC-03 before finalizing GSTR-9/9C.
4. Portal Tracking: Monitor official GSTN updates for the deployment of a fix for the pending-return error before attempting to submit.

A summary of the Handbook on E-Way Bill under GST (Second Edition, August 2026 published by the ICAI) for ready reference:

1. Core Concept & Applicability

• Statutory Framework: Governed by Section 68 of the CGST Act, 2017 read with Rules 138 to 138F of the CGST Rules, 2017.
• Mandatory Threshold: Required for inter-State movement of goods where consignment value exceeds ₹50,000. For intra-State movement, thresholds are governed by respective State/UT rules (e.g., ₹1,00,000 in Gujarat, Maharashtra, Delhi, Tamil Nadu, etc.; ₹50,000 in others).
• Beyond Supply: E-way bills are required for all movements of goods, whether by way of supply or for other reasons (e.g., job work, SKD/CKD lots, branch transfers, exhibition/fairs, or return of goods).
• Consignment Value Definition: Value determined under Section 15 of the CGST Act, inclusive of CGST, SGST/UTGST, IGST, and Cess charged in the document.

2. Generation & Validity Rules

• Two Parts:
  • Part A: Captures invoice details, GSTIN of supplier/recipient, place of delivery, HSN, and reason for transport.
  • Part B: Captures transport/conveyance details (Vehicle number for road; RR/Airway Bill/Bill of Lading for rail/air/ship).
• Validity Period (Standard Cargo): 1 day for every 200 km (or part thereof).
• Validity Period (Over Dimensional Cargo / Multimodal by Ship): 1 day for every 20 km (or part thereof).
• Extension Window: Can be extended within 8 hours before or 8 hours after the expiry of the validity period.
• Cancellation Window: Can be cancelled by the generator within 24 hours of generation, provided it has not been verified in transit.
• Recipient Action: The recipient can Reject an e-way bill within 72 hours of generation or before delivery (whichever is earlier); otherwise, it is deemed accepted.

3. Key Exceptions & Special Rules

• Exempted Movements: 15 specific categories under Rule 138(14) are exempt from e-way bills (e.g., specified non-GST goods like alcoholic liquor/petroleum, transit cargo to Nepal/Bhutan, goods transported under customs bond, or non-motorised conveyances).
• Short Distance Exemption: Vehicle details in Part-B are not mandatory for road transport up to 50 km within the State from the consignor’s place to the transporter’s place (or transporter to consignee).
• Weighbridge Movement: No e-way bill is required for movement up to 20 km to a weighbridge and back, accompanied by a delivery challan under Rule 55.

4. Penalties & Enforcement (Sections 122, 129, & 130)

• Non-Generation Penalty: Transporting taxable goods without specified documents attracts a penalty of ₹20,000 or the tax sought to be evaded, whichever is higher (Section 122).
• Detention & Seizure: Goods and conveyances in transit without proper documents are liable to detention or seizure under Section 129.
• Minor Discrepancies: As per CBIC Circular No. 64/38/2018-GST, minor errors (such as spelling mistakes in names, PIN code errors not affecting validity, minor address typos, 1-2 digit document number errors, 4/6-digit HSN errors with correct tax rates, or 1-2 character vehicle number errors) attract a minor penalty of ₹500 each under CGST and SGST (₹1,000 under IGST) via DRC-07 rather than full detention.
• Blocking of E-Way Bill (Rule 138E): E-way bill generation facility is blocked for taxpayers defaulting on return filing (GSTR-3B, CMP-08) for two consecutive tax periods.

5. Landmark Judicial Principles

• Intent to Evade Tax: Courts have consistently held that minor procedural lapses or technical infractions (such as non-generation of Part-B or minor address mismatches) do not warrant harsh detention/confiscation under Section 129 unless an independent intent to evade tax (mens rea) is established (Indus Towers, Sangeeta Jain, Robbins Tunnelling).

Mandatory Nature of Part-B for Long Distances: Non-furnishing of Part-B invalidates the e-way bill for long-distance transit, justifying penal consequences (Gati Kintetsu Express). 

2. Important Judgements:

(i) The Hon’ble Punjab & Haryana High Court in Shaurya Alloys Pvt. Ltd. v. State of Punjab and Another (CWP No. 34296 of 2024, decided on October 01, 2026). It brings crucial relief to genuine buyers facing arbitrary Input Tax Credit (ITC) reversals under GST.

Key Highlights of the Judgment

• Constitutional Validity Upheld: The High Court upheld the vires (constitutional validity) of Section 16(2)(c) of the CGST Act, 2017, confirming that the condition of tax payment to the exchequer is valid.
• No Mechanical Reversal: The Court held that Section 16(2)(c) read with Section 155 cannot be used as a standalone tool to mechanically recover or reverse ITC from a bona fide buyer solely because the supplier defaulted on depositing tax or had their registration cancelled retrospectively.
• Primary Duty on Defaulting Supplier: The Department must first proceed against the defaulting supplier before pursuing the purchasing dealer, unless collusion or lack of genuine transaction is established.
• 14 Binding Guidelines: The Court laid down 14 comprehensive binding guidelines for Proper Officers when invoking Section 16(2)(c).
• Quashing & Remand: All 424 Show Cause Notices (SCNs) and orders under challenge were set aside/disposed of to be adjudicated afresh in light of the 14 guidelines.

Context & Key Precedents Considered

The High Court harmonized earlier conflicting and landmark decisions, including:

1. Bhandari Scrap Traders v. State of Punjab
2. Sahil Enterprises v. Union of India
3. R. Infra Projects Ltd.
4. Tata Steel Ltd.

Implications for Taxpayers & Tax Practitioners

• Bona Fide Buyers Protected: Taxpayers who have genuinely received goods/services, possess valid invoices, and paid the supplier through banking channels cannot be penalized arbitrarily without proper investigation into the supplier.
• Standard Operating Procedure for Show Cause Notices: Adjudicating authorities across Punjab and Haryana must re-evaluate pending SCNs against the 14 binding parameters before confirming demand/reversal under Section 16(2)(c).

Systemic Balance: Balances the revenue’s need to protect tax collection with protection for honest, compliant taxpayers against supplier-level defaults beyond their control.

(ii) GST: Retrospective Application of 70:30 Valuation Ratio for Solar Projects Cannot Ipso Facto Constitute ‘Fraud’ or ‘Suppression’ under Section 74:HIGH COURT OF GUJARAT Special Civil Application No.: R/Special Civil Application No. 3617 of 2026:In re: Zodiac Energy Ltd. v. State of Gujarat:

STATUTORY PROVISIONS & NOTIFICATIONS REFERRED

• Central Goods and Services Tax Act, 2017: Section 74 (Determination of tax not paid/short paid by reason of fraud, wilful-misstatement, or suppression of facts), Section 73.
• Notification No. 24/2018–Central Tax (Rate) (Dated Dec 31, 2018; Effective Jan 1, 2019): Amendment introducing statutory 70:30 valuation mechanism for Solar Power Generating Systems (70% deemed supply of goods @ lower rate, 30% supply of services @ 18%).
• CBIC Circular No. 163/19/2021-GST: Clarification regarding retrospective application of the 70:30 ratio for the period from July 1, 2017 to December 31, 2018. 

HEADNOTE

Central Goods and Services Tax Act, 2017 — Section 74 — Extended Period of Limitation — Invocation based on Retrospective Valuation Rules — Solar Power Generating Systems:

The petitioner discharged GST liability for FY 2018–19 at 5% on the supply and installation of Solar Power Generating Systems under the statutory framework prevailing during the relevant period. The 70:30 allocation between goods and services was introduced w.e.f. January 1, 2019 via Notification No. 24/2018-CT (Rate) and later clarified by Circular No. 163/19/2021-GST to apply retrospectively from July 1, 2017. The tax department issued a Show Cause Notice under Section 74 and passed a Form GST DRC-07 order alleging fraud, wilful misstatement, and suppression of facts due to non-adherence to the 70:30 ratio for the pre-notification period.

Held: The retrospective application of a valuation mechanism or clarifying circular cannot automatically convert a bona fide tax position taken under the then-existing legal framework into “fraud,” “wilful misstatement,” or “suppression of facts.” The essential ingredients of Section 74 must be independently proven with direct reference to the law and conduct prevailing at the time the tax was discharged. Deliberate intent to evade tax cannot be presumed merely because a subsequent notification or clarification retrospectively modifies the valuation method. Consequently, the Section 74 SCN and the resultant DRC-07 demand order were quashed.

SUMMARY OF FACTS & SUBMISSIONS

1. Tax Discharge Position (FY 2018–19): For FY 2018–19 (prior to Jan 1, 2019), the petitioner (Zodiac Energy Ltd.) paid GST at 5% on composite EPC contracts relating to Solar Power Generating Systems in accordance with the prevailing tax entries and legal understanding.
2. Regulatory Evolution:
   • W.e.f. January 1, 2019: Notification No. 24/2018–CT (Rate) introduced a statutory deeming fiction, prescribing that 70% of the gross value of solar projects be treated as supply of goods (taxable at lower rate) and 30% as supply of services (taxable at 18%).
   • CBIC Circular No. 163/19/2021-GST: Clarified that taxpayers could apply this 70:30 ratio retrospectively to the period between July 1, 2017 and December 31, 2018.
3. Departmental Action: The tax authorities issued a Show Cause Notice under Section 74 and subsequently confirmed tax demands via Form GST DRC-07, invoking the extended period of limitation on the ground that the petitioner had “suppressed” the 30% service valuation component for FY 2018–19.
4. Petitioner’s Challenge: The petitioner filed a Special Civil Application before the Gujarat High Court, contending that taking a tax position based on the law as it stood during FY 2018–19 cannot be labeled as fraudulent or deliberate evasion simply because a later notification/circular altered the valuation ratio retrospectively.

JUDGMENT & LEGAL RATIONALE

1. Strict Interpretation of Section 74: The High Court observed that to invoke Section 74, the revenue must establish mens rea—an deliberate intent to evade tax or active concealment. The existence of a legal ambiguity or a change in valuation methodology brought about by subsequent amendments does not amount to suppression.
2. Conduct Evaluated at Time of Payment: The conduct of an assessee must be evaluated against the statutory framework and administrative instructions in force at the time of tax payment. Retrospective amendments cannot retrospectively impute bad faith or fraudulent intent to past transactions.

Quashing of Demand: As the department failed to demonstrate independent evidence of fraud or deliberate misstatement apart from the retrospective applicability of the 70:30 ratio, the invocation of Section 74 was held unsustainable in law.

JUDICIAL PRECEDENTS & INTER-COURT ALIGNMENT

This ruling significantly strengthens the legal shield for solar power developers against retrospective tax demands across India:

Key Takeaway for Tax Practitioners:

This judgment reinforces the foundational principle that Section 74 cannot be routinely invoked as a tool to bypass limitation periods whenever there are retrospective rate changes or clarifying circulars. Tax authorities must prove active, deliberate suppression existing at the time the returns were filed. 

(iii) GST: Canteen Recoveries From Employees Not A ‘Supply’; ITC Allowed To Employer On Cost Borne For Statutory Obligations: AUTHORITY FOR ADVANCE RULING, GUJARAT: Advance Ruling No.: GUJ/GAAR/R/2026/36: Date of Order: September 25, 2026 :In re: M/s Torrent Pharmaceuticals Ltd.

STATUTORY PROVISIONS REFERRED

• Central Goods and Services Tax Act, 2017: Section 7 (Scope of Supply), Section 17(5)(b) (Blocked Input Tax Credit & Statutory Exceptions).
• Factories Act, 1948: Section 46 (Statutory obligation to provide canteen facilities in factories with >250 workers).
• Gujarat Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2019: Section 23 (Mandatory establishment of canteen facilities for >100 employees).

HEADNOTE

1. Central Goods and Services Tax Act, 2017 — Section 7 — Scope of supply — Consideration recovered from employees for canteen facility:

The applicant, a pharmaceutical manufacturer, provided subsidized canteen facilities to employees at its plant, R&D facility, and corporate office in compliance with statutory provisions. The applicant recovered a portion of the actual meal cost from employees via direct salary deductions on a no-profit, cost-to-cost basis without carrying out any commercial activity.

Held: The subsidized amounts recovered by an employer from its employees toward canteen facilities do not constitute a “supply of goods or services” under Section 7 of the CGST Act, 2017. Consequently, no GST is leviable on such employee recoveries.

2. Central Goods and Services Tax Act, 2017 — Section 17(5)(b) — Input Tax Credit (ITC) — Mandatory provision of food and beverages under statutory requirement:

The third-party canteen service provider billed the applicant for food and beverages charging 5% GST. Under the proviso to Section 17(5)(b) of the CGST Act, ITC is permissible where an employer is statutorily obligated to provide food/canteen facilities under any prevailing law.

Held: The applicant is entitled to claim Input Tax Credit (ITC) on the GST charged by the third-party canteen service provider. However, such ITC entitlement is restricted strictly to the proportion of the cost actually borne/subsidized by the applicant company. Input tax credit is disallowed on the portion of expenses recovered from employees.

SUMMARY OF FACTS & SUBMISSIONS

1. Background: The applicant, M/s Torrent Pharmaceuticals Ltd., is engaged in the business of manufacturing and distribution of pharmaceutical products.
2. Statutory Obligation:
   • At its manufacturing plant (Indrad) and R&D facility (Bhat), employing more than 250 workers, the applicant operates a canteen facility pursuant to Section 46 of the Factories Act, 1948.
   • At its corporate office (Ahmedabad), employing more than 100 staff, the canteen facility was provided pursuant to Section 23 of the Gujarat Shops and Establishments Act, 2019.
3. Operational Mechanism: Third-party canteen contractors prepare and supply food/beverages, raising invoices on the applicant with 5% GST. The applicant subsidizes a major portion of the meal cost (50% or pay-grade dependent) and recovers the remaining balance from employees through automated monthly salary deductions without retaining any margin or profit.
4. Questions Submitted for Advance Ruling:
   • Whether the amount recovered from employees for canteen facilities forms a taxable supply under Section 7 of the CGST Act, 2017?
   • Whether Input Tax Credit (ITC) is available on the GST paid to the third-party canteen service provider?

FINDINGS AND RULING

1. Taxability of Employee Recovery (Section 7, CGST Act):

The AAR observed that the transaction between the employer and the employee for providing subsidized food is a facility mandated under labor legislation, rather than an independent business activity conducted in the course or furtherance of business. Relying on established jurisprudence and Circular guidelines, the authority ruled that recovering part of the meal cost on a back-to-back basis does not amount to a taxable supply of goods or services under Section 7.

2. Eligibility of Input Tax Credit (Section 17(5)(b), CGST Act):

Under Section 17(5)(b)(i) of the CGST Act, ITC on food, beverages, and outdoor catering is generally blocked. However, the proviso inserted into Section 17(5)(b) specifies that ITC shall be available where providing such goods or services is obligatory for an employer to provide to its employees under any law for the time being in force.

Since the applicant is mandated by the Factories Act, 1948, and the Gujarat Shops and Establishments Act, 2019, to maintain canteen facilities, the statutory bar under Section 17(5)(b) is lifted.

3. Quantum of ITC Admissibility:

The AAR clarified that ITC can only be claimed on the actual cost/expenditure borne by the employer as a business expense. To the extent that the cost is recovered from employees, ITC cannot be retained by the applicant.

FINAL ORDER / RULING

Key Takeaway for Practitioners:

This ruling re-emphasizes that where a statutory mandate (under state or central labor laws) forces an employer to provide meals, the recovery is non-taxable under GST. Additionally, it confirms the proportionate restriction formula for claiming ITC under the proviso to Section 17(5)(b) of the CGST Act.

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.