GST WEEKLY UPDATE :39/2025-26 (28.12.2025) By CA Vipul Khandhar

Reading Time: 9 minutes

-By CA Vipul Khandhar

1.    GSTAT Becomes Fully Operational from 21 January 2026: Bench Allocation and Revocation of Staggered Filing of Appeals:

The Goods and Services Tax Appellate Tribunal (GSTAT), a long-awaited pillar of the GST dispute resolution framework, is set to become fully operational with effect from 21 January 2026. In a significant administrative and procedural development, the Government of India has notified the allocation of benches to newly appointed Members of GSTAT, while the Tribunal has simultaneously revoked the earlier requirement of staggered filing of appeals under Section 112 of the CGST Act, 2017.

These twin developments mark a decisive step towards ensuring effective, accessible, and uniform adjudication of GST disputes across the country.

Allocation of GSTAT Benches: Office Order No. 03/2025

The Department of Revenue, Ministry of Finance, vide Office Order No. 03/2025 dated 26 December 2025, has notified the bench-wise allocation of Members of the Goods and Services Tax Appellate Tribunal, with the approval of the competent authority.

The order covers the deployment of:

• Judicial Members,
• Technical Members (Centre), and
• Technical Members (State)

across GSTAT benches located throughout States and Union Territories.

Geographic Spread of GSTAT Benches

Members have been posted to GSTAT benches in a wide range of locations, including:

Patna, Lucknow, Dehradun, Prayagraj, Ranchi, Kolkata, Hyderabad, Shimla, Mumbai, Guwahati, Rajkot, Coimbatore, Pune, Chandigarh, Jammu, Ahmedabad, Delhi, Bhopal, Jodhpur, Ernakulam, Cuttack, Gurugram, Raipur, Chennai, Bengaluru, Ghaziabad, Nagpur, Jaipur, and several other locations.

This extensive geographical coverage reflects the Government’s intent to decentralise appellate adjudication and ensure that taxpayers across the country have reasonable physical and digital access to the Tribunal.

Balanced Composition of Benches

The separate allocation of Judicial Members and Technical Members from both Centre and States ensures a balanced bench composition, combining:

• legal and judicial expertise, and
• domain-specific technical knowledge of GST administration.

Such a structure is expected to enhance the quality, consistency, and credibility of appellate decisions under the GST regime.

All Members have been directed to join their respective benches on 21 January 2026, which effectively marks the functional commencement of GSTAT across India.

Revocation of Staggered Filing of Appeals under Section 112

In another important procedural reform, the GSTAT has revoked its earlier order dated 24 September 2025, which had mandated staggered filing of appeals under Section 112 of the CGST Act, 2017.

Background of the Staggered Filing Order

The earlier order was issued under Rule 123 of the GSTAT (Procedure) Rules, 2025, directing that appeals arising from orders passed under:

• Section 107 (First Appeal), and
• Section 108 (Revision)

be filed in a staggered manner, based on timelines specified in a table appended to the order. The objective was to manage the initial load on the GSTAT appeal portal.

Revocation Order No. 315/2025

Vide Order No. 315/2025 dated 16 December 2025, the President of GSTAT, Justice Sanjaya Kumar Mishra, after reviewing the current capabilities of the GSTAT portal, decided to dispense with the staggered filing protocol.

The order records that:

• the existing portal infrastructure is capable of handling appeal filings efficiently, and
• staggered filing is no longer necessary to preserve system efficacy.

Accordingly, in exercise of powers under Rule 123 of the GSTAT (Procedure) Rules, 2025, the earlier order dated 24-09-2025 stands revoked with effect from 18-12-2025.

Legal Safeguards Clarified

The revocation order expressly provides that:

• Appeals already filed pursuant to the earlier staggered filing order remain valid;
• The revocation is without prejudice to the statutory powers of the Appellate Tribunal under Section 112 of the CGST Act, 2017.

This clarification ensures continuity and legal certainty for taxpayers who had already acted in compliance with the earlier directions.

Practical Implications for Taxpayers and Professionals

The combined effect of these developments is substantial:

1. Unrestricted Filing of Appeals

Taxpayers can now file GST appeals under Section 112 without any staggered or phased restriction, ensuring unhindered access to appellate remedies.

2. Operational Readiness of GSTAT

With bench allocation finalised and Members joining from 21 January 2026, GSTAT is poised to function as a full-fledged national appellate body.

3. Reduction in High Court Litigation

The operationalisation of GSTAT is expected to significantly reduce the burden on High Courts, which have been entertaining GST appeals in the absence of the Tribunal.

4. Greater Certainty in GST Jurisprudence

Uniform appellate adjudication across States will contribute to the development of consistent and authoritative GST jurisprudence.

Conclusion

The notification of GSTAT bench allocations and the revocation of staggered filing of appeals together signal the formal and functional commencement of the GST appellate ecosystem envisaged under the CGST Act, 2017. With effect from 21 January 2026, taxpayers and practitioners can expect a more accessible, efficient, and structured appellate mechanism for resolving GST disputes.

2. GSTN Introduces Long-Awaited Flexibility in Credit Note Handling under IMS:

In a significant compliance-friendly enhancement, the Goods and Services Tax Network (GSTN) has rolled out an important update to the Invoice Management System (IMS) on the GST portal, addressing a long-standing practical difficulty faced by taxpayers in handling credit notes involving ineligible Input Tax Credit (ITC).

The update introduces flexibility at the stage of accepting credit notes, enabling taxpayers to determine whether acceptance of a credit note should result in reduction of ITC. This change marks a notable shift from the earlier rigid system-driven approach and is expected to reduce errors, double reversals, and reconciliation mismatches.

Position Prior to the Update

Earlier, the GST portal was designed such that acceptance of a credit note under IMS automatically triggered reduction of ITC, irrespective of whether:

• the ITC was ineligible,
• the ITC had already been reversed in earlier returns, or
• the ITC was never availed at all.

This system-driven reduction often led to:

• double reversal of ITC,
• artificial mismatches between books and GST returns, and
• unnecessary reconciliation and follow-up adjustments in subsequent periods.

Taxpayers had limited control, even in cases where the commercial or legal position clearly warranted no further ITC reduction.

Key Features of the Updated Functionality

With the latest enhancement in IMS, taxpayers are now empowered to choose the ITC treatment while accepting credit notes on the GST portal.

Choice While Accepting Credit Notes

At the time of acceptance, the portal now provides the following option:

• “Reduce ITC – Yes / No”

The implications are as under:

• “Yes” (Default Option):

Acceptance of the credit note will result in reduction of ITC, consistent with the earlier system behaviour.

• “No”:
  Acceptance of the credit note will not reduce ITC, allowing taxpayers to retain the existing ITC position.

This flexibility is particularly relevant in scenarios where:

• ITC was already reversed in earlier GSTR-3B returns,
• ITC was ineligible under Section 17(5) of the CGST Act, or
• ITC was never availed due to accounting or eligibility constraints.

Handling of Multiple Records

GSTN has also clarified the treatment of bulk acceptance of credit notes:

• Where multiple credit notes are accepted together using the checkbox selection,
  the chosen response (Yes or No) will apply uniformly to all selected records.
• If taxpayers require differential treatment, individual records must be processed separately.

This clarification is crucial to avoid unintended ITC adjustments in cases involving mixed eligibility.

The update delivers several practical benefits:

1. Prevention of Double ITC Reversal

Taxpayers can now avoid redundant reversals where ITC has already been adjusted.

2. Improved Accuracy in ITC Reporting

The IMS acceptance process can now align with the actual legal and accounting position.

3. Reduced Reconciliation Burden

Lesser mismatches between books, GSTR-2B, and GSTR-3B returns.

4. Enhanced Compliance Ease

The change reflects GSTN’s responsiveness to field-level challenges faced by businesses and professionals.

Alignment with GST Law Framework

While the update is procedural in nature, it aligns with the broader principles of the GST law, particularly:

• Section 16 of the CGST Act, 2017, which allows ITC only when conditions are fulfilled; and
• Section 17, which mandates reversal or restriction of ITC only to the extent required by law.

By allowing taxpayers to consciously determine ITC impact, the system now better mirrors the substantive legal position, rather than enforcing a mechanical adjustment.

Conclusion

The introduction of flexible credit note handling in IMS is a much-needed and welcome reform in GST compliance. By allowing taxpayers to decide whether ITC should be reduced at the time of acceptance, GSTN has resolved a persistent practical anomaly that often led to double reversals and avoidable disputes.

This enhancement not only improves accuracy and efficiency but also strengthens the credibility of the GST compliance ecosystem by placing greater trust and responsibility in the hands of taxpayers.

3. AAR & Important Judgements:

(i) Insolvency and Bankruptcy Code – Overriding Effect – Anti-Profiteering under GST – Extinguishment of Claims and dues not forming part of a Resolution Plan approved by the NCLT stand extinguished – Resolution Applicant not liable for unquantified anti-profiteering liability of the corporate debtor

Once a Resolution Plan is approved by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016, all claims, demands, and dues not included in the Resolution Plan stand extinguished by virtue of Section 238 of the IBC. Consequently, the Resolution Applicant, taking over the corporate debtor on a “clean slate,” cannot be held liable for unquantified or undecided liabilities under Section 171 of the CGST Act, 2017, including alleged failure to pass on Input Tax Credit benefits pertaining to the period prior to approval of the Resolution Plan.

DGAP v. Puma Realtors Pvt Ltd

[NAPA/84/PB/2025, GSTAT Delhi, order dated 26 August 2025]

Facts

• Puma Realtors Pvt Ltd (“the Petitioner”) was subjected to anti-profiteering proceedings initiated by the Director General of Anti-Profiteering (DGAP) for alleged non-passing of Input Tax Credit (ITC) benefits under Section 171 of the CGST Act, 2017.
• A Show Cause Notice was issued and investigation proceedings were initiated by the DGAP.
• Subsequently, pursuant to insolvency proceedings under the IBC, the ownership and control of the Petitioner were taken over by M/s One Group Developers Pvt Ltd, the Resolution Applicant, after approval of a Resolution Plan by the NCLT in June 2021.
• The Petitioner contended that upon approval of the Resolution Plan, all pending and unquantified claims, including alleged ITC profiteering liabilities, stood extinguished.
• The Respondent argued that approval of a Resolution Plan under the IBC does not absolve the Resolution Applicant from statutory obligations under the CGST Act.
• Aggrieved, the Petitioner approached the GSTAT under Section 171 of the CGST Act, seeking closure of anti-profiteering proceedings.

Issue

Whether a Resolution Applicant, after approval of a Resolution Plan under the IBC, can be held liable under Section 171 of the CGST Act, 2017 for unquantified ITC benefits allegedly not passed on by the corporate debtor prior to approval of the Resolution Plan?

Held

The GSTAT Delhi held in favour of the Petitioner and ruled as under:

• Section 238 of the IBC, containing a non-obstante clause, has overriding effect over all other laws, including provisions of the CGST Act, to the extent of inconsistency.
• Reliance was placed on the Supreme Court judgment in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & Ors. [MANU/SC/1577/2019], wherein it was held that:
  • all claims which are not part of the resolution plan or not submitted during the insolvency process stand extinguished upon approval of the plan.
• Once a Resolution Plan is approved by the NCLT:
  • all claims and dues not included therein stand frozen and extinguished, and
  • the Resolution Applicant acquires the corporate debtor on a “fresh slate” basis.
• The Tribunal observed that unquantified and undecided anti-profiteering liabilities, including alleged ITC benefits not passed on prior to approval of the Resolution Plan, cannot be enforced against the Resolution Applicant.
• Accordingly, the anti-profiteering proceedings against Puma Realtors Pvt Ltd were ordered to be closed.

Ratio Decidendi

Unquantified GST liabilities, including anti-profiteering demands under Section 171 of the CGST Act, 2017, which are not crystallised or incorporated in a Resolution Plan approved under the IBC, stand extinguished, and the Resolution Applicant cannot be saddled with such past liabilities after taking over the corporate debtor.

(ii) GST – Exemption – Renting of Residential Dwelling – Hostel Accommodation – Long-term Stay – Entry 13 of Notification No. 9/2017-IGST (Rate)
Leasing of residential dwelling to a commercial lessee for sub-leasing as hostel to students and working professionals qualifies as “renting of residential dwelling for use as residence” – Exemption upheld

Renting of a residential dwelling to a lessee, who in turn sub-leases the premises as a hostel providing long-term accommodation to students and working professionals, qualifies for exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) as “services by way of renting of residential dwelling for use as residence.” The exemption does not require that the lessee itself must personally use the premises as a residence, and denial of exemption on such ground would amount to reading additional conditions into the notification.

The State of Karnataka & Anr. v. Taghar Vasudeva Ambrish & Anr.

[Civil Appeal Nos. 7846 & 7847 of 2023, Supreme Court, order dated 04 December 2025]

Facts

• The Respondent, co-owner of a residential property, executed a lease deed dated 21 June 2019 in favour of M/s DTwelve Spaces Private Limited, a commercial entity.
• The lessee sub-leased the property as a hostel providing long-term accommodation to students and working professionals.
• The Authority for Advance Ruling (AAR) and Appellate Authority for Advance Ruling (AAAR), Karnataka, denied exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) on the ground that:
  • the lessee was not using the property as a residence itself, and
  • hostel accommodation was akin to “sociable accommodation” and not a residential dwelling.
• Aggrieved, the Respondent approached the Karnataka High Court, which allowed the writ petition and quashed the AAAR order.
• The Revenue challenged the High Court’s decision before the Supreme Court.

Issue

Whether leasing of a residential dwelling to a commercial lessee for sub-leasing as a hostel providing long-term accommodation to students and working professionals qualifies for exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) as “renting of residential dwelling for use as residence”?

Held

Karnataka High Court

• Held that Entry 13 of the exemption notification is clear and unambiguous and does not impose a condition that the lessee must itself use the premises as residence.
• Observed that the term “residential dwelling”, not being defined in the Act, must be understood in common parlance.
• Relied upon the CBIC Education Guide dated 20 June 2012, which clarifies that residential dwelling includes residential accommodation meant for long-term stay and excludes temporary accommodations like hotels and guest houses.
• Held that hostel accommodation used by students and working professionals for residence falls within the scope of “residential dwelling”.
• Quashed the AAAR order and allowed the exemption.

Supreme Court

The Hon’ble Supreme Court dismissed the Revenue’s appeals and upheld the High Court’s judgment, holding as under:

• The subject property qualifies as a residential dwelling based on:
  • its residential classification in official records, and
  • common parlance understanding supported by the CBIC Education Guide dated 20 June 2012.
• The condition that the residential dwelling must be used as a residence stands satisfied where the premises are taken on rent for residential use, even if such use is facilitated through an aggregator.
• Entry 13 of the exemption notification does not mandate that the lessee must itself reside in the property.
• Imposing such a requirement would amount to adding words to the exemption entry, which is impermissible in law.
• A narrow interpretation suggested by the Revenue would defeat the legislative intent behind granting exemption for renting of residential dwellings.

Ratio Decidendi

Exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) is available where a residential dwelling is rented for use as a residence, irrespective of whether the lessee personally occupies the premises, and includes cases where the dwelling is sub-leased as hostel accommodation for long-term residential use.

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.

(Author is a well known Chartered Accountant practicing at Ahmedabad on Direct and Indirect Tax matters)