GST WEEKLY UPDATE :44/2025-26 (01.02.2026) By CA Vipul Khandhar

Reading Time: 13 minutes

-By CA Vipul Khandhar

1.    Summary of the proposed GST changes introduced in the Finance Bill, 2026: CGST Act Amendments:

1 Post-Sale Discounts (Section 15) — The earlier requirement of linking post-sale discounts to a specific agreement tied to invoices has been removed. Now, the supplier simply needs to issue a credit note under Section 34, and the recipient must reverse the input tax credit attributable to the discount.

Date of implementation: On such date as the Central Government may, by notification in the Official Gazette

2 Credit Notes for Discounts (Section 34) — A corresponding change to ensure credit notes can be issued specifically for post-supply discounts referred to under the amended Section 15, bringing coherence between the two provisions.

Date of implementation…

𝐏𝐨𝐬𝐭-𝐬𝐚𝐥𝐞 𝐝𝐢𝐬𝐜𝐨𝐮𝐧𝐭𝐬 𝐥𝐢𝐛𝐞𝐫𝐚𝐥𝐢𝐬𝐞𝐝

* Requirement of linking discounts to pre-existing agreements removed

* Discounts now allowed based on credit note issuance + proportionate ITC reversal

* Aligns GST valuation with commercial & accounting practices

𝐂𝐥𝐞𝐚𝐫 𝐥𝐢𝐧𝐤𝐚𝐠𝐞 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝐯𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐜𝐫𝐞𝐝𝐢𝐭 𝐧𝐨𝐭𝐞𝐬

* Section 15(3) (valuation) expressly aligned with Section 34 (credit notes)

* Removes long-standing ambiguity on post-sale discount adjustments

* Ensures uniform and predictable application of GST law

𝐏𝐫𝐨𝐯𝐢𝐬𝐢𝐨𝐧𝐚𝐥 𝐫𝐞𝐟𝐮𝐧𝐝 𝐞𝐱𝐭𝐞𝐧𝐝𝐞𝐝 𝐭𝐨 𝐢𝐧𝐯𝐞𝐫𝐭𝐞𝐝 𝐝𝐮𝐭𝐲 𝐬𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞: Previously, provisional refunds of 90% were limited to zero rated supplies. Now, taxpayers claiming refunds due to an inverted duty structure will also be eligible for provisional refunds.

* Faster access to blocked ITC for manufacturers

* Improves liquidity, reduces working capital pressure and financing costs

𝐄𝐱𝐩𝐨𝐫𝐭 𝐫𝐞𝐟𝐮𝐧𝐝𝐬 𝐦𝐚𝐝𝐞 𝐬𝐦𝐨𝐨𝐭𝐡𝐞𝐫: threshold limit for sanctioning refund claims on goods exported with payment of tax has been removed.

* Threshold limit for sanction of export refunds removed

* Enables quicker and automatic processing, especially benefiting small exporters

𝐀𝐀𝐑 𝐚𝐩𝐩𝐞𝐥𝐥𝐚𝐭𝐞 𝐯𝐚𝐜𝐮𝐮𝐦 𝐚𝐝𝐝𝐫𝐞𝐬𝐬𝐞𝐝 (𝐞𝐟𝐟𝐞𝐜𝐭𝐢𝐯𝐞 𝐟𝐫𝐨𝐦 𝟎𝟏-𝟎𝟒-𝟐𝟎𝟐𝟔)

* Government empowered to notify an existing authority/tribunal to hear appeals

* Resolves hardship caused by conflicting State AAR rulings

* Restores certainty and reduces inter-State interpretational conflicts

𝐋𝐚𝐧𝐝𝐦𝐚𝐫𝐤 𝐫𝐞𝐟𝐨𝐫𝐦 𝐟𝐨𝐫 𝐢𝐧𝐭𝐞𝐫𝐦𝐞𝐝𝐢𝐚𝐫𝐲 𝐬𝐞𝐫𝐯𝐢𝐜𝐞𝐬: The special rule that determined the place of supply for intermediary services based on the location of the supplier has been removed. It will now follow the default rule under Section 13(2), making the place of supply the location of the recipient.

* Special place of supply rule under Section 13(8)(b), IGST Act omitted

* Place of supply now based on recipient’s location (default rule)

* Genuine cross-border intermediary services qualify as exports

* Major boost to services exports and reduction in long-pending litigation

2. SEZs are allowed to sell in DTA subject to limit of exports made from SEZ subject to ensuring no adverse impact on DTA entities operating

One-Time Relaxation for SEZ DTA Sales in Union Budget 2026–27:

Balancing Export Liquidity with Protection of Domestic Industry

1. Background and Policy Context

In the Union Budget 2026–27, the Government has announced a special one-time relief measure for manufacturing units operating in Special Economic Zones (SEZs). The measure seeks to mitigate the adverse impact of global trade disruptions and subdued external demand by enabling SEZ units to partially access the domestic market.

The proposal allows eligible SEZ manufacturing units to sell goods into the Domestic Tariff Area (DTA) at concessional rates of duty, subject to a prescribed limit linked to their export performance and safeguards to ensure no adverse impact on domestic manufacturers operating in the DTA. 

2. Existing Legal Framework for DTA Sales by SEZ Units

Under the SEZ Act, 2005 and SEZ Rules, 2006:

• Supplies from SEZ to DTA are treated as imports into India
• Such sales ordinarily attract:
  • Basic Customs Duty (BCD)
  • Integrated GST (IGST)
  • Other applicable duties
• DTA sales are generally restricted and regulated to preserve the export-oriented character of SEZs

As a result, SEZ units often face limited flexibility in monetizing excess capacity during periods of weak export demand. 

3. Budget 2026–27: One-Time DTA Sales Relief for SEZ Units

 3.1 Key Features of the Announcement

The Union Budget proposes to:

• Permit one-time DTA sales by eligible SEZ manufacturing units
• Levy concessional rates of duty, instead of full customs duties
• Cap such DTA sales to a prescribed proportion of exports made by the SEZ unit
• Introduce safeguards to ensure no adverse impact on DTA entities

This relief is explicitly positioned as a temporary and exceptional measure, not a permanent shift in SEZ policy. 

3.2 Export-Linked Quantitative Restriction

A critical safeguard is the linkage of DTA sales to export performance:

• The quantity/value of DTA sales will be limited to a specified percentage of exports already made
• This ensures:
  • Continued export focus of SEZ units
  • Prevention of excessive diversion of SEZ production to the domestic market
  • Alignment with WTO-compliant export incentive principles

Such export-linked limits mirror controls found in earlier SEZ and EOU frameworks. 

4. Protection of Domestic Tariff Area (DTA) Industry

 4.1 Policy Sensitivity

The Budget announcement explicitly acknowledges the need to protect DTA manufacturers from market distortion. This is significant, as unrestricted concessional DTA access for SEZ units could otherwise lead to:

• Price undercutting
• Uneven tax incidence
• Competitive disadvantage for domestic units operating without fiscal concessions 

4.2 Likely Safeguards

While detailed notifications are awaited, the following safeguards are expected:

• Sector-specific eligibility criteria
• Product-wise restrictions
• Monitoring of market impact on domestic manufacturers
• Conditions preventing dumping or predatory pricing
• Possible exclusion of sensitive or import-substitute sectors

The policy intent is to provide temporary liquidity relief, not structural advantage. 

5. Economic and Operational Rationale 

5.1 Addressing Idle Capacity

Global supply chain disruptions and demand compression have resulted in underutilisation of manufacturing capacity in SEZs. The one-time DTA access allows SEZ units to:

• Monetise idle capacity
• Maintain cash flows
• Preserve employment
• Ensure business continuity

 5.2 Liquidity Support without Fiscal Overreach

By imposing concessional (not nil) duties, the Government strikes a balance between:

• Revenue protection
• Support to exporters
• Avoidance of excessive fiscal leakage

This calibrated approach reflects a measured policy response rather than a blanket concession. 

6. GST and Customs Implications

• DTA sales will continue to be treated as imports
• Concessional duty structure will likely apply to:
  • Basic Customs Duty
  • IGST, subject to notifications
• Compliance requirements under:
  • SEZ Act and Rules
  • Customs law
  • GSTlaw  will continue, with possible procedural relaxations

SEZ units must carefully evaluate pricing, duty incidence, and documentation before availing the benefit. 

7. Strategic Considerations for SEZ Units

SEZ manufacturers should:

• Assess export performance to determine DTA eligibility limits
• Evaluate cost-benefit of concessional DTA sales versus exports
• Monitor forthcoming notifications and sectoral conditions
• Maintain robust records to substantiate compliance
• Ensure pricing does not invite anti-competitive scrutiny

3. Customs & Central Excise Amendments under Finance Bill, 2026: A Comprehensive Professional Analysis:

1. Introduction

The Finance Bill, 2026 proposes wide-ranging amendments in the Customs duty structure and residual Central Excise framework, primarily aimed at tariff rationalization, withdrawal of sunset exemptions, promotion of domestic manufacturing, and alignment of exemptions with policy priorities such as Make in India, renewable energy, healthcare, and critical minerals.

A significant policy shift visible this year is the migration of duty rates from exemption notifications into the First Schedule of the Customs Tariff Act, 1975, thereby reducing excessive reliance on conditional exemptions and improving certainty in customs valuation and classification.

2. Key Policy Themes Emerging from the Amendments

Before examining individual chapters, the following broad trends merit attention:

1. Tariff over Exemption Policy

Numerous concessional rates earlier prescribed through notifications have now been incorporated directly into the First Schedule, with corresponding exemption entries being omitted.

2. Sunset of Conditional Concessions

Several long-standing exemptions, particularly those linked to end-use conditions, SEZ supplies, or sector-specific benefits, have been allowed to lapse after review.

3. Support to Strategic Sectors

Continued thrust is visible for:

• Renewable energy (solar, wind, storage)
• Pharmaceuticals and rare disease treatment
• Nuclear power and defence aviation
• Critical minerals and electronics manufacturing

4. Rationalization & Simplification

Redundant entries have been removed, overlapping concessions merged, and tariff items re-structured to improve classification clarity.

3. Chapter-wise Analysis of Customs Amendments

(A) Agriculture, Food & Allied Chapters (Chapters 1 to 24)

• Withdrawal of Nil BCD on zoo animals (Chapter 1) marks a clear rollback of non-essential concessions, with imports now attracting a standard BCD rate.
• In Chapters 2, 3, 5, 8, 12, 20, 21 and 22, concessional rates on items such as meat, seafood inputs, seeds, nuts, berries and food preparations have been shifted from notifications to the tariff, without altering the effective rate.
• For seafood exporters, the duty-free import limit for processing inputs has been enhanced, signalling export facilitation.
• In Chapter 23, SEZ-to-DTA exemption on castor oil cake has been withdrawn, reinforcing parity between domestic and SEZ clearances.

Professional takeaway:

Importers must realign classification and exemption tracking systems, as reliance on notifications alone may lead to incorrect duty computation post-1 May 2026.

(B) Minerals, Chemicals & Petrochemicals (Chapters 25 to 29)

• Several minerals and ores (fluorspar, graphite, quartz, hafnium, etc.) have had their concessional rates embedded into the tariff, ensuring stability.
• Critical mineral Monazite has been granted Nil BCD, aligning with India’s strategic resource policy.
• In Chapter 28, selective duty increases (Potassium hydroxide) and duty reductions (solar glass inputs) indicate calibrated protection.
• Chapter 29 witnesses both withdrawal of concessional entries and major tariff item restructuring, particularly for pharma and solar-linked chemicals.

Professional takeaway:

Chemical and mineral importers should carefully examine effective dates, as some changes apply from 2 February 2026 while others are deferred to 1 May 2026.

(C) Pharmaceuticals & Healthcare (Chapter 30)

One of the most significant relief measures in the Bill is the extension of full customs duty exemption to:

• 17 new life-saving drugs, and
• 7 additional rare diseases under the National Policy for Rare Diseases, 2021.

At the same time, selective concessional rates (e.g., artificial plasma) have been withdrawn, restoring tariff rates.

Professional takeaway:

Hospitals, importers, and patient beneficiaries should ensure updated documentation to claim exemptions under revised lists.

(D) Plastics, Rubber & Textiles (Chapters 39, 40, 47, 56)

• Introduction of a separate tariff item for biodegradable plastic articles reflects environmental policy integration.
• Concessional rates on EPDM rubber and non-woven hygiene inputs have been withdrawn, increasing import cost.
• Textile pulp and speciality inputs continue to enjoy stable tariff-based concessions.

Professional takeaway:

Manufacturers relying on concessional raw material imports must reassess cost structures and pricing.

(E) Metals & Engineering Goods (Chapters 71 to 84)

• Multiple capital goods and industrial inputs have seen either withdrawal of sunset concessions or migration to tariff rates.
• Nuclear power equipment, lithium-ion battery manufacturing capital goods, and defence aviation components receive targeted exemptions.
• Tariff restructuring in steel pipes, tubes and engineered products improves classification granularity.

Professional takeaway:

Project importers and EPC contractors should revisit landed cost calculations and exemption eligibility, especially for large infrastructure projects.

(F) Electronics, Machinery & Transport Equipment (Chapters 85 to 90)

• Withdrawal of exemptions on items like CD-ROMs, camera parts, e-reader inputs, ATM equipment, etc., reflects technological obsolescence and revenue rationalisation.
• Continued incentives for microwave oven manufacturing, battery components, aircraft parts, and renewable energy equipment demonstrate policy continuity.
• Clarificatory circulars (e.g., on Remote Pilot Aircraft) address interpretational disputes.

Professional takeaway:

Electronics importers must watch for reclassification risks and higher BCD exposure due to withdrawal of long-standing exemptions.

4. Central Excise – Current Position

While Central Excise today remains limited primarily to petroleum products and tobacco, the Finance Bill, 2026 does not introduce major structural changes. However, alignment of customs duty on inputs indirectly impacts excisable industries through cost escalation and credit chain implications.

5. Effective Dates – A Critical Compliance Aspect

The amendments operate on multiple effective dates:

• 2 February 2026 – immediate changes under provisional collection
• 1 April 2026 – lapse of sunset exemptions
• 1 May 2026 – tariff restructuring and migration of rates

Failure to track these dates may result in short-payment of duty, interest exposure, and litigation.

Chapter-wise Summary of Customs Amendments (Finance Bill, 2026)

Chapter / HSN	Very short change	Change (brief)	Notification / Circular	Act / Rule / Provision
Ch. 1	Zoo animals exemption withdrawn	Nil BCD entry omitted; BCD now 30% w.e.f. 02.02.2026	Notif. 02/2026-Cus	Customs Act, 1962; First Schedule CTA
Ch. 2	Rate moved to tariff	BCD for frozen turkey meat shifted from exemption to First Schedule	Notif. 02/2026-Cus	CTA, 1975 First Schedule
Ch. 3	Export facilitation	Duty-free import limit raised 1% → 3% FOB; validity till 31.03.2028	Notif. 02/2026-Cus	Section 25, Customs Act
Ch. 5	Rate moved to tariff	Artemia cysts BCD incorporated in First Schedule	Notif. 02/2026-Cus	CTA First Schedule
Ch. 8	Rate rationalisation	BCD on nuts & berries shifted to tariff	Notif. 02/2026-Cus	CTA First Schedule
Ch. 12	Rate moved to tariff	Seeds for sowing & shea nuts shifted to tariff	Notif. 02/2026-Cus	CTA First Schedule
Ch. 13	Tariff restructuring	New 19 tariff items created	Finance Bill 2026	Fourth Schedule CTA
Ch. 15	Rate moved to tariff	Lanolin BCD incorporated in tariff	Notif. 02/2026-Cus	CTA First Schedule
Ch. 20	Rate moved to tariff	Makhana, roasted nuts BCD shifted to tariff	Notif. 02/2026-Cus	CTA First Schedule
Ch. 21	Rate moved to tariff	BCD on 2106 90 goods in tariff	Notif. 02/2026-Cus	CTA + SWS notif
Ch. 22	Rate moved to tariff	Cranberry products BCD in tariff	Notif. 02/2026-Cus	CTA First Schedule
Ch. 23	SEZ benefit withdrawn	Castor oil cake SEZ exemption lapsed; BCD 15%	Notif. 113/2003 lapse	Customs Act, 1962
Ch. 25	Minerals rationalised	Acid grade fluorspar etc. shifted to tariff	Notif. 02/2026-Cus	CTA First Schedule
Ch. 26	Critical mineral boost	Monazite BCD reduced to Nil	Notif. 02/2026-Cus	Section 25, Customs Act
Ch. 27	Energy exemptions lapse	Naphtha/LPG exemptions end 31.03.2026	Notif. 02/2026-Cus	CTA First Schedule
Ch. 28	Input duty changes	KOH BCD ↑; solar glass inputs Nil BCD	Notif. 01 & 02/2026-Cus	Section 25
Ch. 29	Pharma/solar tweak	Alpha-pinene concession withdrawn; tariff restructuring	Notif. 02/2026-Cus	CTA Fourth Schedule
Ch. 30	Health relief	17 drugs + 7 rare diseases added for exemption	Notif. 02/2026-Cus	Section 25
Ch. 31	Fertiliser rationalisation	Concessions withdrawn; tariff rate applies	Notif. 02/2026-Cus	CTA First Schedule
Ch. 33	Rate moved to tariff	Odoriferous substances BCD in tariff	Notif. 02/2026-Cus	CTA First Schedule
Ch. 38	Concession lapse	Zeolite exemption ends; tariff applies	Notif. 02/2026-Cus	CTA
Ch. 39	Plastic inputs	EVA continues in tariff; biodegradable item created	Finance Bill 2026	CTA Fourth Schedule
Ch. 40	Rubber concession withdrawn	EPDM BCD 7.5% → 10%	Notif. 02/2026-Cus	CTA
Ch. 41	Leather rate shift	Wet blue leather BCD in tariff	Notif. 02/2026-Cus	CTA First Schedule
Ch. 47	Textile input	Rayon grade pulp BCD in tariff	Notif. 02/2026-Cus	CTA
Ch. 48	Stationery	4823 90 90 BCD in tariff	Notif. 02/2026-Cus	CTA
Ch. 49	Drawings	Architectural plans BCD in tariff	Notif. 02/2026-Cus	CTA
Ch. 56	Hygiene inputs	Non-woven fabric concession ends	Notif. 02/2026-Cus	CTA
Ch. 66	Umbrella protection	Specific rate introduced	Finance Bill 2026	Provisional Collection Act
Ch. 71	Precious metals	Catalyst concession lapses	Notif. 02/2026-Cus	CTA
Ch. 72	Alloy steel	INVAR BCD increased	Notif. 02/2026-Cus	CTA
Ch. 73	Engineering goods	Boiler parts concessions lapse	Notif. 02/2026-Cus	CTA

Note: Chapters not listed above carry No Change as per Annexure I.

4. Central Excise in the Post-GST Era: Current Position and Finance Bill Developments:

1. Introduction

With the introduction of GST in July 2017, Central Excise duty has been largely subsumed for most goods. However, Central Excise continues to remain relevant for a limited but significant category of goods, namely petroleum products and tobacco products, including cigarettes and other tobacco substitutes.

The Finance Bill and allied notifications for the current year reaffirm the continued relevance of Central Excise, particularly as a policy instrument for revenue mobilisation, public health objectives, and price regulation in sensitive sectors.

2. Scope of Central Excise – Goods Currently Covered

At present, Central Excise duty continues to be levied on the following categories:

1. Petroleum Products
   • Petroleum crude
   • High Speed Diesel (HSD)
   • Motor Spirit (Petrol)
   • Natural Gas
   • Aviation Turbine Fuel (ATF)
2. Tobacco & Tobacco Products
   • Cigarettes
   • Cigars and cheroots
   • Cigarillos
   • Other manufactured tobacco and tobacco substitutes

These goods remain outside the GST regime and are subject to Central Excise duty under the Central Excise Act, 1944, read with the Fourth Schedule to the Central Excise Tariff Act, 1985.

3. Structure of Duties on Tobacco Products

The duty structure on tobacco products continues to be multi-layered, comprising:

• Basic Excise Duty (BED)
• National Calamity Contingent Duty (NCCD)
• Other cesses, where applicable

A key policy position reaffirmed in recent clarifications is that NCCD continues as an integral part of the excise levy on cigarettes, even when restructuring of duties takes place through GST or Customs.

The combined levy structure reflects the Government’s intent to use excise as a sin tax and a public health deterrent.

4. Finance Bill – Key Central Excise Related Developments

Although no large-scale structural overhaul has been proposed, the Finance Bill and related notifications indicate the following important aspects:

(a) Continuity of Excise on Tobacco

• No proposal to subsume tobacco excise into GST.
• Existing specific and ad-valorem based excise rates
• Duty structure remains aligned with cigarette length, filter type, and packing.

(b) Revenue Protection Strategy

• Excise continues to act as a stable revenue source, especially given volatility in petroleum pricing.
• Rate rationalisation is carried out through notifications rather than statutory amendments, allowing flexibility.

(c) No Expansion of Excise Coverage

• No new products have been brought under the excise net.
• This confirms the Government’s policy that Central Excise is now a sector-specific levy, not a general manufacturing tax.

5. Compliance Framework for Excise Assessees

Despite limited coverage, compliance obligations remain rigorous:

• Registration under Central Excise
• Maintenance of statutory records
• Monthly duty payment
• Filing of ER-1 / ER-2 returns
• Physical controls and audit exposure, especially for tobacco units

Tobacco manufacturers continue to face heightened scrutiny, including:

• Machine-based capacity determination
• Stock verification
• Preventive checks

6. Interplay with GST and Customs

While petroleum and tobacco remain outside GST, businesses must manage the dual tax interface:

• Customs duty on imports
• Central Excise on manufacture
• GST on input services and ancillary supplies

The non-availability of seamless input tax credit across GST and excise chains leads to embedded tax costs, particularly for downstream industries.

7. Litigation and Interpretational Issues

Common areas of dispute continue to be:

• Classification disputes under the Excise Tariff
• Valuation (transaction value vs MRP-based levy)
• Applicability of NCCD
• Allegations of clandestine manufacture (especially in tobacco)

Judicial precedents have consistently held that strict interpretation of excise exemptions is required, given the revenue-sensitive nature of excisable goods.

8. Conclusion

Central Excise, though drastically reduced in scope post-GST, continues to play a crucial fiscal and regulatory role, particularly for tobacco and petroleum products. The Finance Bill signals a policy of continuity rather than expansion, with excise being retained as a targeted levy rather than a broad-based tax.

 

5. GSTN Advisory on Interest Computation and GSTR-3B Enhancements – Effective January 2026:
6. Introduction

The GST Network (GSTN) has issued an important advisory introducing multiple system-level enhancements in GSTR-3B, effective from the January 2026 tax period onwards. These changes primarily aim to align interest computation with Rule 88B and Section 50 of the CGST Act, 2017, improve accuracy in reporting of past-period liabilities, and streamline ITC utilization and interest recovery in cancellation cases.

This article analyses the key changes, their legal backing, and practical implications for taxpayers and professionals.

2. Revised Interest Computation in GSTR-3B (Table 5.1)

2.1 Background

Earlier, interest on delayed payment of tax was computed without fully factoring in the minimum cash balance available in the Electronic Cash Ledger (ECL) during the period of delay. This often resulted in higher interest liability, contrary to the proviso to Rule 88B(1).

To address this, GSTN has enhanced the system logic from January 2026 tax period onwards.

2.2 Revised Interest Formula

As per the advisory, interest will now be computed using the following formula:

Interest = (Net Tax Liability – Minimum Cash Balance in ECL from due date to date of debit)
× (Number of days of delay / 365)

× Applicable Interest Rate

This computation gives due credit for the lowest available cash balance maintained by the taxpayer during the delayed period.

2.3 System-Computed Interest – Key Compliance Points

• Interest in Table 5.1 of GSTR-3B will now be:
  • Auto-computed
  • Non-editable downward
• Taxpayers:
  • Cannot reduce the auto-populated interest
  • May increase the amount, if self-assessment shows higher liability
• The auto-computed interest represents minimum payable interest only

📌 Important: Interest for delayed January 2026 returns will be auto-populated in February 2026 GSTR-3B.

3. Auto-Population of Tax Liability Break-up Table

3.1 Purpose of the Enhancement

The Tax Liability Break-up Table in GSTR-3B captures supplies of earlier tax periods, which are reported and paid in the current return. Earlier, this reporting was manual and prone to errors.

3.2 New System Logic (Effective January 2026)

From January 2026 onwards:

• GST Portal will auto-populate the Tax Liability Break-up Table
• Based on:
  • Date of documents reported in GSTR-1 / GSTR-1A / IFF
  • Supplies pertaining to previous tax periods
  • Tax discharged in the current GSTR-3B

Navigation path:

Login → GSTR-3B Dashboard → Table 6.1 → Tax Liability Break-up

3.3 Advisory Clarification

• Auto-populated figures are suggestive
• Taxpayers may:
  • Modify values upward, if required
  • Ensure consistency with books and reconciliations

4. Suggestive Cross-Utilization of ITC – Table 6.1

4.1 Earlier Restriction

Earlier, the system imposed rigid utilization sequences even after IGST ITC was exhausted, limiting flexibility in tax payment.

4.2 Revised Facility

From January 2026 onwards:

• Once IGST ITC is fully exhausted:
  • Taxpayers may use CGST and SGST ITC to pay IGST liability
  • In any sequence, as permitted by law

This change aligns system functionality with Section 49 of the CGST Act and reduces unnecessary compliance hurdles.

5. Interest Collection through GSTR-10 (Final Return)

5.1 Applicability

For cancelled registrations, where:

• The last applicable GSTR-3B is filed after the due date

5.2 New Mechanism

• Applicable interest on such delayed GSTR-3B:
  • Will be levied and collected through GSTR-10
  • Ensures recovery of statutory dues even post-cancellation

This change plugs a long-standing revenue leakage in cancellation cases.

6. Legal Alignment and Practical Impact

The enhancements collectively:

• Ensure compliance with:
  • Section 50 of CGST Act
  • Rule 88B of CGST Rules
• Reduce:
  • Manual errors
  • Litigation on interest computation
• Improve:
  • Transparency
  • System-driven compliance
  • Ease of doing business

7. Action Points for Taxpayers & Professionals

✔ Review cash ledger balances before filing delayed returns

✔ Reconcile auto-computed interest with internal workings

✔ Verify auto-populated tax liability break-ups

✔ Educate clients on non-editable interest fields

✔ Track cancellation cases for GSTR-10 interest impact

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.