Indirect Tax Updates

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Indirect Tax Updates

IDT Developments and Associated Procedures

The Hon’ble Gujarat High Court held that a Special Economic Zone unit is entitled to claim refund on the input invoices received from an Input Service Distributor [Ajanta Pharma Ltd 2025 (10) TMI 1159-Gujarat High Court]:

In this case, the petitioner was a Special Economic Zone Unit (SEZ) engaged in the business of manufacturing and distributing medicines worldwide inter alia authorized to operate at Special Economic Zone at Dahej District. The petitioner was also registered under the provisions of the CGST Act, 2017 and had received invoice from Input Service Distributor (ISD’) towards proportionate distribution of input services. However, as the petitioner was making zero rated supplies, it was not able to utilize the credit that has been lying in the Electronic Credit Ledger and had filed various refund applications under the category of ‘Export of Goods/Services without payment of Tax’.

The Hon’ble High Court has held that a SEZ unit i.e. petitioner, is entitled to the refund of unutilized IGST credit on services used for zero-rated supplies. Relying on the court’s Britannia India precedent, the ratio that ISD as defined under Section 2(61) of the CGST Act is an office of supplier of the goods and services which receives tax invoice issued under Section 31 of the CGST Act towards the receipt of input services and issues a prescribed document for the purpose of distributing the credit of CGST / IGST paid on such goods or services which is also squarely covered by the decision of this Court in the case of Britannia and the revenue department was directed to process the petitioner’s refund claim under Section 54 of the CGST Act.

The Hon’ble Gauhati High Court held that Input Tax Credit is eligible in case of bonafide purchases and reads down Section 16 (2)(aa) of the CGST Act, 2017 in case of Mcleod Russel India Limited [WP(C) No 5725 of 2022]

In this case, the taxpayer was engaged in the business of manufacturing, blending and supply of tea and had claimed ITC on the basis of availability of Invoices even though such invoices were not reflected in FORM GSTR-2B. The taxpayer contended that denying ITC to the purchaser for the default of the supplier to report and pay taxes on its outward supply is arbitrary. The revenue department’s contention was that the CGST Act, 2017 specifically provides for entitlement of ITC and they apply uniformly to all the taxpayers.

The Hon’ble Gauhati HC held that denying ITC to a bona fide purchaser solely on the basis that tax has not been paid by the supplier undermines the very object and purpose of the CGST Act, 2017 and this restriction imposes undue burden on the purchasing dealer. Accordingly, the Hon’ble High Court has read down the provisions of Section 16(2)(aa) until CBIC finds a practical solution to ITC availability for bona fide purchasers.

Important Notifications Issued During The Quarter

Introduction of Amendment in the CGST Rules, 2017 [(Fourth Amendment) Rules 2025]:

Vide Notification 18/2025- Central Tax dated 31 October 2025, the CBIC has introduced amendments which are effective from 01 November 2025:

• Automatic Registration (Rule 9A): Any applicant who applies for GST registration under Rule 8, Rule 12 or Rule 17 will, upon identification through the GST common portal based on data analysis and risk parameters, be granted registration electronically within three working days from submission of the application
• Optional Simplified Registration for Small B2B Suppliers (Rule 14A): An optional scheme allows quick electronic registration for small taxpayers with monthly B2B output tax liability not exceeding INR 0.25 million. Upon successful Aadhaar authentication, the GST registration will be granted electronically within three working days.
• Amendments to Existing Rules & Forms
  • In Rule 10, references to registrations under Rule 9A and Rule 14A have been inserted so that provisions related to issuance of acknowledgements and certificates apply uniformly.
  • Several registration forms (such as GST REG-01, REG-02 to REG-05) have been revised to include options under Rule 14A, and new forms (REG-32 and REG-33) have been introduced for the withdrawal process from the simplified scheme.

Important GST Circulars and Instructions issued during the Quarter

• Vide Circular No. 253/10/2025- GST dated 01 October 2025, the CBIC has clarified that Circular No. 212/6/2024-GST, issued on 26 June 2024 which outlined the procedure for suppliers to provide evidence that recipients had reversed Input Tax Credit (ITC) for post-supply discounts has been withdrawn effective from 01 October 2025.
• Vide Circular No. 254/09/2025-GST dated 27 October 2025, the CBIC has assigned specific Central Tax officers as the “Proper Officers” and has set monetary limits for adjudication proceedings under key provisions of the CGST Act, 2017. The primary objective of the circular is to remove jurisdictional ambiguity and ensure uniformity in the issuance of show cause notices (SCNs) and the imposition of penalties.
• Vide Instruction No 06/2025-GST dated 03 October 2025, the CBIC has issued specific instructions related to processing of refunds with aim of accelerating refund processing, reducing delays and manual intervention, improving ease of doing business and liquidity for business and ensuring uniformity and predictability. W.e.f. 01 October 2025, a refund application filed will be evaluated by the GST system using risk scoring and cases identified as “low-risk” will be eligible for provisional sanction of 90% of the claimed refund. This will reduce the need for detailed officer scrutiny before provisional release.

Customs and Foreign Trade Policy Related Developments

Operationalization of voluntary post clearance revision mechanism:

Section 18A of the Customs Act was inserted by the Finance Act, 2025 which provides a voluntary post-clearance revision mechanism allowing importers or exporters to revise entries in a Bill of Entry, Shipping Bill, Bill of Export, etc. Under this provision the importer/exporter may self-assess and correct errors in entries already made.

If the revision results in additional duty, that can be paid voluntarily with interest (Section 28AA) without penalty. If the revision leads to excess duty paid, the revised entry is treated as a refund claim under Section 27. Vide Notification No. 68/2025-Customs (NT), 69/2025-Customs (NT), 70/2025-Customs (NT) and 71/2025-Customs (NT), dated 30 October 2025, the CBIC has ensured that the powers and functions under Section 18A are delegated to designated customs officers for properly administering the new regime, prescribed a fee of INR 1,000 for each application filed under the new Section, introduced the Customs (Voluntary Revision of Entries Post Clearance) Regulations, 2025 to provide for the procedural framework: electronic filing, processing of revised entry applications, generation of ARN, verification, re-assessment, refund mechanism, etc. and specified circumstances where revisions under Section 18A are not permitted, particularly where a separate mechanism already exists.

Vide Circular No. 26/2025-Customs dated 31 October 2025, the CBIC has provided further clarification on the procedural requirements for carrying out these amendments through ICEGATE portal.

Revision of officer powers under Section 110:

Vide Notification No. 63/2025-Customs (N.T.) dated 1 October 2025, the Notification No. 26/2022-Customs (N.T.) has been amended to update jurisdiction and powers of customs officers including seizure powers under Section 110 of the Customs Act. The powers now cover additional sub-sections to streamline enforcement actions. Prior to this amendment, the Officer’s empowerment was limited to certain portions of Section 110, mainly the core seizure power. However, post this amendment, as additional sub-sections of Section 110 are covered, the officers can now deal with seizure of goods, seizure of documents, handling of seized goods and procedural continuity with allied provisions.

This amendment has been introduced to ensure that any officer who seizes goods is also legally empowered to carry out all consequential actions under the same section, without jurisdictional gaps.

Consolidation of Customs Duty Notifications into one notification:

The CBIC has issued Notification No. 45/2025- Customs dated 24 October 2025 to consolidate earlier issued 31 notifications of customs duty and exemption into a single ccomprehensive tariff/exemption notification to simply the duty structure/benefits for the taxpayers. This notification has been made effective from 01 November 2025 and does not introduce new tariff rate changes (except for minor amendments). It principally merges and streamlines existing duty/exemption provisions.

Issuance of second tranche of Tariff Concessions under India-EFTA (Iceland, Norway and Switzerland) and fifth tranche of tariff concessions under India-Australia ECTA.:

Vide Notifications 51, 52 and 53 – Customs dated 30 December 2025, the CBIC has issued the second tranche of tariff concessions in case of goods imported from European countries of Switzerland, Norway and Iceland respectively. The concession includes various exemptions from Basic Customs Duty, Health Cess and Agriculture Infrastructure and Development Cess on various goods. The Notifications can be referred to understand the tariff concessions in detail.

Similarly, vide Notification No. 50/2025-Customs dated 30 December 2025, the CBIC the CBIC has issued the fifth tranche of tariff concessions in case of goods imported from Australia.

Circulars and Instructions under Customs:

• Vide Circular No. 24/2025-Customs dated 2 October 2025, the CBIC has introduced an automated approval mechanism for registration of incentive bank accounts (for IGST refund/drawback purposes) and IFSC codes across all Customs locations. If an Importer-Exporter Code (IEC) has already had a specific bank account and IFSC code approved at one Customs location, the system will automatically grant approvals at other locations for the same combination. This eliminates the need for manual approval by port officers for the same IEC-bank account-IFSC pairing.
• Vide Circular No. 29/2025-Customs dated 21 November 2025, CBIC has launched an upgraded version of the Single Window Interface for Facilitating Trade (SWIFT 2.0), a fully digital platform intended to act as a single touch point for importers, exporters, and Partner Government Agencies for clearance and regulatory processes. In the first phase, the following agencies are being onboarded into SWIFT 2.0:
  • Animal Quarantine and Certification Services (AQCS)
  • Plant Quarantine Management System (PQMS)
  • Food Safety and Standards Authority of India (FSSAI)

These integrations enable online submission, tracking, and processing of No Objection Certificates (NOCs) required for clearance of imported goods. Mandatory use of SWIFT 2.0 for AQCS, PQMS, and FSSAI filings has begun from 01 December 2025

• Vide Circular No. 28/2025-Customs dated 15 November 2025, the CBIC has announced and operationalised a new online module on ICEGATE 2.0 for trade and departmental use, specifically for permissions under Section 65 of the Customs Act, 1962. The module covers permissions related to MOOWR (Manufacture and Other Operations in Warehouse Regulations, 2019) for warehouses licensed under Section 58 of the Customs Act and MOOSWR (Manufacture and Other Operations in Special Warehouse Regulations, 2020) for special warehouses licensed under Section 58A.

Miscellaneous updates under Foreign Trade Policy and SEZ:

• Amendment in Import Policy Condition of specific items covered under Chapter 29, 38, 70, 73, 84 and 85 of ITC (HS) 2022: The DGFT vide Notification 40/2025-26 dated 10 October 2025 has amended import policy conditions of certain goods covered under Chapter 70, 73, 84 and 85 w.e.f. 01 November 2025. Further, Renewable Energy Equipment Import Monitoring System (REEIMS) has been introduced effective from 01 Nov 2025 and importers of specified equipment under Chapters 70, 73, 84 & 85 are required to register online before import.Similarly, vide Notification 45/2025-26 dated 15 October 2025, and 50/2025-26 dated 18 December 2025, import policy conditions of certain goods covered under Chapter 29 and 38 have been amended.
• Clarification on redemption of Advance Authorizations impacted by erstwhile Rule 96(10) of the CGST Rules and imports effected between 13 October 2017 to 09 January 2019: Policy Circular No. 07/2025-26 dated 11 November 2025 clarifies that EODC shall not be withheld if the exporter satisfies any of the following conditions for import consignments made under the AA scheme during the affected period:
  • Payment of IGST in Cash: if the importer/exporter paid IGST in cash at the time of import under the AA scheme during the specified period,
  • Non-availment of Duty Exemption: where the exporter did not avail any duty exemptions (such as IGST exemption, compensation cess exemption, etc.) except Basic Customs Duty (BCD)
  • Compliance With Pre-Import Conditions: if the exporter has duly complied with pre-import conditions and all other procedural requirements under the AA scheme for those consignments.

EODC withholding on the basis of the old rule shall not be sustained.

• Procedure for implementation of Import Management System for import of restricted IT Hardware (e.g. Laptops, tablets, etc.)Vide Policy Circular no 08/2025-26 dated 07 December 2025, the DGFT has provided clarifications w.r.t. implementation of Import Management System (‘IMS’) wherein the importers are required to apply in IMS for import authorization on the DGFT website. The application portal will be open from 22 December 2025 to 15 December 2026. The importer is allowed to submit multiple applications in a year and once issued, an authorization shall be valid till 31 December 2026.
• Vide Public Notice No. 30/2025-26 dated 28 October 2025, amendments in Certificate of Origin framework under FTP-2023 (Appendix-2B) has been introduced and wherein list of authorized agencies that can issue Preferential Certificates of Origin has been updated to improve access/processing under India-EFTA TEPA.
• Vide Public Notice No. 32/2025-26 dated 20 November 2025 amendments to Para 2.08 of the Handbook of Procedures (HBP) 2023 have been introduced to streamline the IEC processing framework to clarify conditions for issue/renewal of IEC and to provide procedural ease. This update is important for exporters/importers managing IEC and compliance under FTP.
• Vide Public Notice No. 34/2025-26 dated 01 December 2025, an amendment in Para 6.34 i.e. validity norms of Letters of Permission/Intent (LOP/LOI) have been introduced under HBP 2023. This clarifies the validity criteria for LOP/LOI issued under various FTP schemes and enhances clarity on utilization timelines and compliance conditions
• Vide Public Notice No. 35/2025-26 dated 10 December 2025, amendments to Chapter 7 of HBP 2023 have been introduced to bring more clarity regarding jurisdiction for Ras/EOUs for claiming Deemed Export benefit procedures. These changes have been introduced to rationalize deemed export benefits eligibility and documentation, improving operational clarity in Chapter 7. This update streamlines processing for manufacturers and traders claiming benefits.

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