GST WEEKLY UPDATE :45/2025-26 (08.02.2026) By CA Vipul Khandhar

-By CA Vipul Khandhar,

1. Option to Opt for Composition Scheme for FY 2026–27 – Filing of Form GST CMP-02 Enabled on GST Portal:

The Goods and Services Tax Network (GSTN) has enabled the facility on the GST Portal for regular taxpayers to opt for the Composition Scheme for the Financial Year 2026–27.

Eligible taxpayers intending to pay tax under the Composition Levy may exercise this option electronically by filing Form GST CMP-02 through the GST Portal.

Statutory Background

The Composition Scheme is governed by Section 10 of the Central Goods and Services Tax Act, 2017, read with Rule 3 of the CGST Rules, 2017. The scheme is designed to simplify compliance for small taxpayers by allowing payment of tax at a prescribed rate with reduced compliance requirements.

Procedure to Opt for Composition Scheme

Taxpayers may opt for the Composition Scheme by following the steps below on the GST Portal:

Services → Registration → Application to Opt for Composition Levy → File Form GST CMP-02

Upon successful filing of Form CMP-02, the taxpayer will be treated as a composition taxpayer from the beginning of the relevant financial year, subject to fulfilment of eligibility conditions.

Timeline for Filing CMP-02

The facility to file Form GST CMP-02 for FY 2026–27 is available up to 31 March 2026. Taxpayers intending to avail the benefit of the scheme for the said financial year must ensure timely filing within the prescribed period.

Key Points to Note

• The option once exercised shall apply for the entire financial year unless the taxpayer becomes ineligible.
• Taxpayers opting for the scheme must comply with restrictions on inter-State outward supplies, supply through e-commerce operators, and other conditions prescribed under Section 10.

• A taxpayer opting for composition levy is required to pay tax at the applicable composition rate and file quarterly returns in Form GSTR-4.
• Where applicable, Form GST ITC-03 may be required to be filed for reversal of input tax credit on stock held.

Conclusion

Eligible regular taxpayers seeking simplified compliance and lower tax rates may consider opting for the Composition Scheme for FY 2026–27 by filing Form GST CMP-02 on the GST Portal on or before 31 March 2026. Careful evaluation of eligibility conditions and business implications is recommended before exercising the option. 

2. LUT (Letter of Undertaking) for FY 2026–27 Enabled on GST Portal – Key Compliance Advisory:

The Goods and Services Tax Network (GSTN) has enabled the facility on the GST Portal for filing Letter of Undertaking (LUT) for the Financial Year 2026–27.

Exporters intending to make zero-rated supplies without payment of Integrated GST (IGST) are required to furnish a valid LUT for the relevant financial year.

Statutory Framework

The requirement of filing LUT is governed by Section 16 of the IGST Act, 2017, read with Rule 96A of the CGST Rules, 2017. A valid LUT allows exporters to supply goods or services for export without payment of IGST, subject to fulfilment of prescribed conditions.

Applicability

Filing of LUT for FY 2026–27 is mandatory for:

• Export of services without payment of IGST
• Export of goods without payment of IGST
• Supplies made to SEZ units or SEZ developers without payment of tax

Taxpayers failing to furnish LUT are required to export on payment of IGST and claim refund thereafter.

Procedure to File LUT on GST Portal

Taxpayers may file LUT electronically by navigating as follows:

Services → User Services → Furnish Letter of Undertaking (LUT)

The LUT, once accepted, remains valid for the entire financial year.

Timeline and Due Date

Taxpayers intending to export under LUT for FY 2026–27 must furnish the LUT on or before 31 March 2026. Delay or non-filing may lead to procedural hurdles, including restriction on zero-rated supplies without payment of tax.

Key Points to Note

• LUT must be filed annually for each financial year
• A valid LUT is a pre-condition for export without payment of IGST
• Any past default in export proceeds may impact acceptance of LUT
• Taxpayers should ensure timely filing to avoid compliance disruptions

Conclusion

With the LUT filing facility for FY 2026–27 now live on the GST Portal, exporters are advised to complete the process well in advance of the due date. Timely filing ensures uninterrupted zero-rated supplies and smooth GST compliance.

3. GSTN Operationalises Online “Application for Unbarring Returns” Module on GST Portal:

The Goods and Services Tax Network (GSTN) has operationalized a new functionality on the GST Portal titled “Application for Unbarring Returns”, providing a formal online mechanism for taxpayers to seek removal of system-level restrictions on filing GST returns.

This development addresses long-standing practical difficulties faced by taxpayers whose returns were barred due to prolonged non-compliance.

Legal Framework for Barring of Returns

As per Rule 59(6) of the CGST Rules, 2017, read with Sections 39 and 47 of the CGST Act, 2017, where a registered person fails to furnish GST returns for a continuous period of three years, the GST system automatically bars the filing of subsequent returns.

Once such system-level barring is triggered:

• The relevant return period becomes non-editable on the GST Portal
• The taxpayer is technically prevented from filing pending returns, even if willing to regularize compliance

This often resulted in a compliance deadlock, requiring manual intervention.

Introduction of Online Application for Unbarring Returns

To streamline the process, GSTN has now enabled an online application facility allowing taxpayers to request unbarring of returns directly through the GST Portal.

Procedure to Apply for Unbarring of Returns

A registered person may submit the application by navigating as follows:

Services → Returns → Application for Unbarring Returns

Key procedural aspects include:

• The taxpayer is required to clearly state the reasons for non-filing of returns
• The application is electronically routed to the Jurisdictional Assessing Officer (AO)
• The AO examines the facts and reasons furnished
• Upon being satisfied, the AO may approve the application for unbarring
• Once approved, the barred return period becomes available for filing on the GST Portal

Significance of the New Module

The operationalization of this module brings much-needed relief by:

• Providing a structured and transparent online remedy
• Eliminating the need for manual correspondence or physical follow-ups
• Enabling genuine taxpayers to regularize past non-compliance
• Reducing litigation and administrative bottlenecks

Practical Advisory

Taxpayers whose returns have been barred due to prolonged non-filing should promptly:

• Review their compliance status
• File the application with complete and accurate reasons
• Ensure timely follow-up post approval to avoid re-triggering of restrictions

Conclusion

The introduction of the “Application for Unbarring Returns” module marks a significant step towards resolving system-driven compliance deadlocks under GST. It reinforces the government’s intent to facilitate voluntary compliance while maintaining statutory discipline.

Taxpayers and professionals should actively leverage this facility to regularise pending returns and restore normal compliance status.

4. Much-Awaited GST Portal Update: “Additional Notices & Orders” Tab Merged with “Notices and Orders”:

In a significant usability enhancement, the Goods and Services Tax Network (GSTN) has implemented a long-awaited update on the GST Portal by merging the “Additional Notices & Orders” tab with the existing “Notices and Orders” tab. The move is aimed at simplifying taxpayer interaction and strengthening digital compliance management under GST.

Major Portal Enhancement

To streamline navigation and eliminate duplication of information, the GST Portal will no longer display a separate “Additional Notices & Orders” tab. Going forward, all notices and orders issued under any GST module will be available exclusively under a single consolidated section titled “Notices and Orders”.

This consolidation marks an important step towards a cleaner and more intuitive portal architecture.

Key Highlights of the Update

• The standalone “Additional Notices & Orders” tab has been discontinued
• All departmental communications, including notices, orders, directions, and system-generated alerts, will now be displayed in one unified location
• The update reduces the risk of missing critical statutory communications due to multiple tabs

Benefits to Taxpayers and Professionals

The merger offers several practical advantages:

• Single-window access to all GST notices and orders
• Improved clarity and reduced compliance confusion
• Better tracking of proceedings across GST modules
• Faster and easier access to important departmental communications

For professionals handling multiple GST registrations, this update significantly enhances efficiency and compliance monitoring.

How to Access the Updated Section

Taxpayers may view all notices and orders by navigating as follows:

Dashboard → Services → User Services → View Notices and Orders

It is advisable for taxpayers to regularly monitor this section to ensure timely response to any notice, order, or action required by the department.

Conclusion

The merger of the “Additional Notices & Orders” tab with the primary “Notices and Orders” section reflects GSTN’s continued efforts to improve the GST Portal’s usability and compliance framework. By providing a consolidated communication hub, the update enhances transparency, reduces oversight risks, and supports smoother GST compliance for taxpayers and professionals alike. 

5. AAR & Important Judgements:

(i) Hon’ble Bombay High court Decision Regarding Consolidated GST Show-Cause Notice Covering Multiple Financial Years Held Invalid:

(Applicant – M/s Milroc Good Earth Developers)

Facts of the Case

The petitioner, M/s Milroc Good Earth Developers, a Goa-based real estate developer, was issued a single consolidated show-cause notice (SCN) by the GST Department covering seven financial years, i.e., FY 2017–18 to FY 2023–24.

The SCN proposed:

• Demand of GST on construction services allegedly provided to landowners
• Reversal of Input Tax Credit (ITC)
• Levy of GST under reverse charge on Transfer of Development Rights (TDR)

The notice sought to club multiple tax periods into one proceeding.

Issue Before the Court

Whether the GST Department is legally empowered to issue a single “bunched” SCN covering multiple financial years, despite each year being a distinct tax period under the CGST Act.

Observations of the Bombay High Court

The Bombay High Court made the following key observations:

• Each financial year is an independent tax period under the CGST Act
• Issuing a single SCN for multiple financial years violates statutory scheme, including provisions relating to assessment and limitation
• Such consolidation defeats the safeguards embedded in limitation provisions under GST law
• The approach adopted by the Department amounted to excess of jurisdiction

The Court strongly disapproved the practice of issuing omnibus notices covering several years.

Decision

The High Court quashed the consolidated SCN in its entirety, holding that:

• “Bunched” or consolidated SCNs for multiple years are not permissible in law
• The impugned notice amounted to judicial overreach by the Department
• Each financial year must be independently examined and proceeded against, in accordance with law

Legal Principle Laid Down

GST may be a uniform tax law, but every financial year stands on its own.Clubbing multiple years into one SCN is impermissible and beyond jurisdiction.

Significance of the Ruling

This judgment has far-reaching implications:

• Reinforces year-wise limitation discipline under GST
• Provides strong grounds to challenge omnibus or consolidated SCNs
• Protects taxpayers from procedural shortcuts and jurisdictional excesses
• Particularly relevant for sectors like real estate, where long-period disputes are common

(ii) Hon’ble Allahabad Highcourt Decision Regarding Proceedings under Section 74 without Allegation of Fraud and without Jurisdiction Held Invalid:

(Applicant – M/s Raghuvansh Agro Farms Ltd)

Facts

The petitioner, a registered dealer engaged in supply of agricultural goods and areca nuts, was subjected to proceedings under Section 74 of the U.P. GST Act pursuant to a survey. A show cause notice alleging circular trading was issued, followed by an adjudication order confirming tax, interest and penalty. The appeal against the adjudication order was also dismissed.

Issues

1. Whether proceedings under Section 74 could be sustained in the absence of specific allegations and findings of fraud, wilful misstatement or suppression of facts.
2. Whether the State GST authorities had jurisdiction to initiate proceedings against a taxpayer falling under Central GST jurisdiction, in the absence of any cross-empowerment notification.
3. Whether ITC could be denied merely on allegations of circular trading despite documentary evidence of actual transactions.

Held

The Allahabad High Court quashed the entire proceedings, including the adjudication and appellate orders.

Key Observations

• Section 74 can be invoked only when fraud, wilful misstatement or suppression of facts with intent to evade tax is specifically alleged and supported by evidence. Absence of these foundational ingredients renders the proceedings without jurisdiction.
• Neither the show cause notice nor the assessment order recorded any categorical finding establishing fraud or intent to evade tax.
• All transactions were supported by tax invoices, e-way bills, bilty, banking channels, and duly reflected in GSTR-1, GSTR-2A and GSTR-3B.
• Non-production of toll plaza receipts cannot justify adverse inference, as there is no statutory requirement under the GST law mandating such evidence.
• Proceedings initiated by State GST authorities were without jurisdiction, as the petitioner was under Central GST jurisdiction and no valid cross-empowerment notification existed.
• Allegations of circular trading were based on presumptions and were unsupported by material evidence, especially when proceedings against suppliers had already been dropped.

Ratio Decidendi

Proceedings under Section 74 of the GST law are jurisdictionally invalid unless fraud, wilful misstatement or suppression of facts is expressly alleged and proved. Denial of ITC cannot be sustained when transactions are duly documented, tax has been paid, and statutory returns are properly reflected. Jurisdictional defects further vitiate the proceedings.

Significance

The judgment reinforces strict compliance with Section 74 preconditions, curbs mechanical invocation of extended limitation and penal provisions, and protects bona fide taxpayers from jurisdictionally flawed and evidence-deficient proceedings, particularly in cases alleging circular trading.

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.