GST WEEKLY UPDATE :17/2025-26 (27.07.2025) By CA Vipul Khandhar

-By Vipul Khandhar, Chartered Accountant

1. No proposal for the applicability of the GST on UPI transaction in excess Rs. 2000/-:

             (In the Rajya Sabha, MoS Finance Pankaj Chaudhary on July 22, 2025, answered and clarified that there is no proposal to levy GST on UPI transactions over ₹2000.)

GOVERNMENT OF INDIA, MINISTRY OF FINANCE, DEPARTMENT OF FINANCIAL SERVICES RAJYA SABHA

GST ON UPI TRANSACTIONS

240. SHRI ANIL KUMAR YADAV MANDADI:

Will the Minister of FINANCE be pleased to state:

(a) whether Government is considering a proposal to levy GST on UPI transactions of over ₹2000.

(b) If so, details thereof;

(c) whether Government has received any representation from public at large not to introduce such measure which will seriously affect the common man; and

(d) If so, details thereof and decision taken by the Government in this regard?

Answer

MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a) to (d) As informed by Department of Revenue, GST rates and exemptions are decided on the basis of recommendations of the GST Council, which is a Constitutional body comprising of members from both the Centre and States/UTs. There is no such recommendation from the GST Council.

2. AAR & Important Judgements:

(i) Hon’ble Supreme Court Decision Regarding No gst on supply electricity distribution licences or as annual/other fees are exempt from Goods and Services Tax (GST).:

The Supreme Court has upheld the Delhi High Court’s ruling that fees collected by the Central Electricity Regulatory Commission (CERC) and the Delhi Electricity Regulatory Commission (DERC) for the supply of electricity or grant of electricity distribution licences or as annual/other fees are exempt from Goods and Services Tax (GST).

The Delhi HC held that the demand notices were “arbitrary and unsustainable.”

“We do not find any good grounds to entertain these special leave petitions (by Directorate General of GST Intelligence), a SC bench comprising Justices J.B. Pardiwala and R. Mahadevan said, while endorsing the HC’s view that the GST department had clearly failed to grasp the “indubitable fact” that these regulatory functions were being discharged by a quasi-judicial body which had all the trappings of a tribunal.

The department had challenged the HC order alleging that the power regulators were not discharging their GST liabilities on amounts received as tariff and licence fees from various power utilities as these functions of the regulators fell under the category of “support services” to electricity transmission and distribution service providers.

However, the HC had rejected the GST authorities’ stand, saying it found “unable to accept, affirm, or even fathom the conclusion that regulation of tariff, inter-state transmission of electricity, or the issuance of license would be liable to be construed as activities undertaken or functions discharged in the furtherance of business.”

According to HC, “the grant of a license to transmit or distribute (electricity) is clearly not in furtherance of business or trade but in extension of the statutory obligation placed upon a commission to regulate those subjects,” the high court had said. The Electricity Act, 2003, makes no distinction between the regulatory and adjudicatory functions vested in and conferred upon an electricity commission, it had added. Those functions are placed in the hands of a quasi-judicial body enjoined to regulate and administer electricity distribution, it had said. “Electricity, undoubtedly, is a natural resource which vests in the State. We have thus no hesitation in observing that the SCNs (show cause notices) infringe the borders of the incredible and inconceivable,” the January order stated.

             (ii) AAR On Input Tax Credit (ITC) is available on the rooftop solar power plant:

             (Applicant- Grand Centre Mall)

Held that Input Tax Credit (ITC) is available on the rooftop solar power plant installed at the mall, when it is used exclusively for the provision of taxable services, as it qualifies both as ‘plant and machinery’ and ‘capital goods’.

Whether the Applicant is eligible to claim ITC as input, input service or capital goods on the procurement and installation of a rooftop solar power plant under Sections 16 and 17 of the CGST Act, 2017?

Held: Input Tax Credit (ITC) is available on the rooftop solar power plant

The Kerala AAR, in Advance Ruling No. KER/15/2025 held as under:

• Observed that, the electricity generated from the solar power plant is used exclusively for consumption for common facilities such as lighting, air conditioning, surveillance, network infrastructure, UPS systems, lifts and escalators, which are essential and form an integral part of the taxable CAM services provided by the Applicant.
• Held that, the solar power plant is used in the course or furtherance of business and therefore meets the eligibility criteria under Section 16(1) of the CGST Act, and that the solar plant qualifies as ‘capital goods’ as per Section 2(19), since its value is capitalised and it is used for business purposes.
• Further held that, since the solar panels are mounted without major civil structures and can be dismantled without significant damage or effort, the installation does not qualify as ‘immovable property’. Hence, the restrictions under Section 17(5)(c) and 17(5)(d) do not apply.
• Held that, the mode of installation, being fixed to rooftop and parking structures by screws and anchors, satisfies the legal test of being fixed to earth by foundation or structural support. Thus, the plant qualifies as ‘plant and machinery’ under Explanation to Section 17(6).
• Further held that, since each licensee has a separate electricity connection and pays their own bills, and the solar-generated electricity is used solely for internal CAM services, the solar plant is not used for any exempt supply of Electrical energy under Notification No.2/2017- Central Tax (Rate) dated June 28, 2017 under HSN 2716. Therefore, the provisions of Section 17(2), requiring proportionate reversal of ITC on account of exempt supplies, are not attracted in this case.

Held that, the Applicant is eligible to avail full ITC on the rooftop solar power plant in terms of Sections 16 and 17 of the CGST Act, 2017.

(iii) Hon’ble High court Decision Regarding now GST officer has to pass reasoned order even though taxpayer has paid penalties under section 129 (e way bill):

(Applicant – ASP Traders Vs State of Uttar Pradesh)

A Bench of Justices JB Pardiwala and R Mahadevan explained that without such a reasoned final order under Section 129(3), the taxpayer is effectively deprived of appeal remedies.

“Every show cause notice must culminate in a final, reasoned order. While Section 129(5) of the CGST Act, 2017 provides that proceedings shall be deemed to be concluded upon payment of tax and penalty, this deeming fiction cannot be interpreted to imply that the assessee has agreed to waive or abandon the right to challenge the levy – a right that is protected by the very enactment itself. The term ‘conclusion’ as used in Section 129(5) merely signifies that no further proceedings for prosecution will be initiated. It does not absolve the responsibility of the proper officer to pass an order concluding the proceedings,” the July 24 ruling said.

The top court also noted that in this case, ASP Traders had said that they had filed a reply objecting to the detention. The GST officers had claimed that the firm’s representative had later orally withdrawn the reply to secure the release of the goods. However, there was no written record to prove any such withdrawal.

“Once objections are filed, adjudication is not optional. It becomes imperative to pass a speaking order to justify the demand of tax and penalty, to safeguard the right of appeal under Section 107 of the CGST Act,” the Court proceeded to hold.

The Court also took note of the GST portal’s limitation, which classifies all penalty payments made through Form DRC-03 as voluntary, and does not allow the taxpayer to record that a payment is being made under protest.

(iv) Gujarat High court decision regarding Penalty could not be imposed in absence of intimation issued in Form GST DRC-01A:

(Applicant – R V Enterprises)

The supplier’s GST registration was cancelled for non-payment of outward tax liability. As a result, the supplier was considered non-genuine under GST law.

The assessee failed to furnish valid documents such as tax invoices, e-way bills, or transport receipts to substantiate the genuineness of the purchases and movement of goods.

Since the supplier did not discharge GST liability on the transactions, the input tax credit claimed by the assessee was held to be inadmissible and required to be reversed.

The department issued a show cause notice and passed an order-in-original demanding reversal of ITC along with penalty; the demand for reversal of ITC was upheld based on the facts.

The penalty was deemed unwarranted as no prior intimation in Form GST DRC-01A was issued to the assessee. Hence, while ITC reversal stood, the penalty was deleted.

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.

(The author is a well known Chartered Accountant practicing in Ahmedabad on Direct and Indirect Taxes)