Goods and Services Tax

Corporate guarantees without fees may attract GST, with deemed valuation applying only after taxable supply is established.
Notes
GST
Corporate guarantees between related parties may constitute taxable supplies without consideration when made in the course or furtherance of business. Taxability must be determined before valuation; Rule 28(2) does not itself create a GST charge. For qualifying guarantees furnished to banks or financial institutions for related recipients in India, the rule generally deems the value to be one per cent of the guaranteed amount per annum or the actual consideration, whichever is higher. Where the recipient is eligible for full input tax credit, the invoiced value is deemed to be the supply's value. Relief granted for particular unremunerated subsidiary guarantees does not invalidate the rule or establish a general exemption.
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GST appeal pre-deposits may be met by verified earlier payments after demand reduction, but filing fees remain separate.
Notes
GST
GST Tribunal appeals require full payment of admitted tax, interest, fines, fees and penalties, plus a 10% deposit of the remaining disputed tax in addition to the first appellate deposit. Where the demand is substantially reduced, an earlier deposit may satisfy the Tribunal-stage requirement, subject to verification; it does not automatically replace that requirement. Filing fees remain independently payable, subject to a minimum of Rs. 5,000 and a maximum of Rs. 25,000, and cannot be paid from the electronic credit ledger. An appeal is treated as filed when final acknowledgement is issued after removal of defects. Payment of the required pre-deposit triggers a deemed stay of recovery of the balance until disposal of the appeal.
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Input tax credit and supplier non-payment: credit cannot be reversed mechanically without transaction scrutiny and supplier recovery review
Notes
GST
Section 16(2)(c) requires actual payment of tax to the Government and is not limited to fraud or collusion, but supplier default alone does not justify mechanical reversal of a recipient's input tax credit. Eligibility requires scrutiny of transaction evidence, the nature of the default, supplier recovery proceedings and the law applicable to the tax period. Supplier cancellation or fraud does not automatically establish recipient ineligibility or complicity. The recipient bears the burden of proving eligibility, while fraud allegations require supporting facts in the notice. Section 41 permits re-availment after supplier payment, and Rule 37A provides a reversal and re-availment mechanism for specified return defaults. Later conditions and mechanisms must not be applied to earlier periods.
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Export payments through repatriable accounts, permitted set-offs and net retention satisfy payment conditions; unrealised goods proceeds affect refunds.
Circulars
GST – States
Export service payments received in convertible foreign exchange or repatriable rupee accounts, including SNRR and INR Nostro accounts, satisfy the payment condition under section 2(6)(iv) of the IGST Act. Stockbrokers' payments through NRO accounts must be routed through repatriable SNRR or NRE accounts to satisfy that condition. Export receivables set off against import payables in accordance with RBI directions, and reinsurance brokers' commission retained through net settlement, also satisfy the condition. For exported goods, proceeds unrealised beyond the FEMA-prescribed or extended period make the corresponding refund liable to deposit or recovery with interest within 30 days. Recovery does not apply to amounts written off by the RBI or an authorised dealer bank.
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Input tax credit on used vehicle trading expenses remains available under the GST margin scheme, subject to statutory conditions.
Circulars
GST – States
Under the GST margin scheme for old and used motor vehicles, the input tax credit restriction applies only to tax paid on the procured vehicles. Credit on other inputs and input services remains available, subject to the WBGST Act. Sublimation paper falls under tariff heading 4809 and attracts 18% GST. The toy entries cover all categories under heading 9503, with 5% GST for non-electronic toys and 18% for electronic toys. Seaweed extract-based bio-stimulants registered under Schedule VI to the Fertiliser (Inorganic, Organic or Mixed) (Control) Order, 1985 fall under heading 3101. Past classification and rate disputes concerning sublimation paper, and classification disputes concerning these bio-stimulants, are recommended for regularisation on an 'as is where is' basis.
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GST exemptions and valuation rules clarify treatment of grant-funded research, vehicle lease recoveries, bank fund transfers and co-lending.
Circulars
GST – States
Eligible government entities and notified institutions may support the GST exemption for grant-funded research and development with a certificate from their head distinguishing it from consultancy. Services imported without consideration by Indian establishments of foreign shipping companies from overseas related persons or establishments are exempt from 1 November 2026; GST payments for 1 July 2017 to 31 October 2026 are regularised on an as-is-where-is basis. Vehicle lessors' recoveries for registration, insurance and incidental costs form part of the composite lease supply and attract its GST rate. TRAI is not Government under GST law. Notional interest on loans or advances under banks' fund transfer pricing qualifies for the interest exemption. NBFC lending services to banks under co-lending arrangements are taxable at the value specified in the contract.
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GST arrest safeguards require the Commissioner's recorded reasons and document identification numbers on specified arrest-related communications.
Case-Laws
GST
GST arrest under Section 69 of the CGST Act requires the Commissioner personally to form and record reasons to believe, based on credible material, concerning the specified offence, the requisite intent and the justification for arrest. The reasons must identify the underlying material, show due application of mind and be communicated to the arrestee; a bare recital is insufficient. Grounds of arrest and reasons to believe require an electronically generated Document Identification Number, subject to limited exceptions and prescribed regularisation. Inclusion in an arrest memo does not dispense with that requirement.
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GST amnesty recognises adjusted tax payments from the original intimation date when assessing interest and penalty waiver eligibility.
Case-Laws
GST
Tax paid through Form GST DRC-03 with an incorrect financial year can be adjusted against the relevant demand through Form GST DRC-03A. Under Rule 142(2B) of the CGST Rules, the adjusted amount is treated as paid towards that demand on the original DRC-03 intimation date. Accepted payment adjustments and appropriation of a pre-deposit that reduce outstanding principal tax to nil satisfy the principal-tax payment condition for interest and penalty waiver under Section 128A of the CGST Act. The competent authority must consider those adjustments in the Electronic Liability Register when examining the waiver application.
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GST recovery on disclosed works-contract price adjustments requires material showing deliberate evasion to invoke the extended limitation period.
Case-Laws
GST
Extended GST recovery under Section 74(1) requires a material-based conclusion, discernible from the show cause notice, that non-payment resulted from fraud, wilful misstatement or suppression of facts with intent to evade tax. Mere non-payment or erroneous self-assessment under a bona fide belief is insufficient, and an approaching limitation deadline cannot replace the statutory preconditions. A writ challenge under Article 226 may be maintained at the show cause stage where jurisdictional conditions are absent, notwithstanding the availability of statutory remedies. An authority cannot establish jurisdiction by incorrectly determining the conditions governing its power.
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Deemed export refunds for suppliers require recipient undertakings, with supply-wise limitation and cross-year claims permitted under GST.
Case-Laws
GST
Suppliers may claim refunds of tax on deemed exports when recipients have not availed input tax credit and furnish undertakings permitting the claims; both parties cannot claim refunds for the same supplies. Refund applications may combine tax periods across financial years. The two-year limitation is assessed for each supply by reference to the return relating to that supply, rather than the period entered in the application. Prior intimation in Form A is required for supplies to an export-oriented unit. An appellate order granting a refund against rejection is treated as an order under Section 54(5), and interest on refunds delayed beyond 60 days is governed by Section 56.
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Transit-state penalty powers exclude documented goods without local tax incidence; revenue-neutral stock-transfer invoice timing mismatches also avoid penalties.
Case-Laws
GST
Inspection of goods in transit is distinct from penal jurisdiction under section 129. Where documented interstate goods merely pass through a State without a tax incidence there, its authorities cannot seize them or impose a penalty under that provision; documentary deficiencies may instead be reported to the GST authorities in the origin or destination State. Such seizure and penalties infringe freedom of trade and commerce under Article 301. Section 129 addresses deliberate tax evasion, not a revenue-neutral invoice timing mismatch between distinct registrations of the same business when valid tax invoices and e-way bills cover the movement.
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Documented input tax credit, appropriation of paid tax and timely tax and interest payment defeat disputed demands and penalties.
Case-Laws
GST
Verified invoices and a Chartered Accountant's certificate substantiated the disputed IGST input tax credit, and Revenue accepted that the related demand was unsustainable. CGST and SGST payments already made required full appropriation; as no tax remained unpaid, the consequential interest demand was unsustainable. Penalties for wrongful credit availment were unsustainable following payment of tax and interest within the period prescribed by section 73(8) of the CGST Act, 2017. The same reasoning applied to the IGST penalty, alongside Revenue's acceptance that the entire demand was unsustainable.
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GST rate and classification clarifications and guidance on services apply to Odisha GST implementation with necessary adaptations.
Circulars
GST – States
CBIC circulars clarifying GST rates and classification of certain goods and the applicability of GST to certain services apply, with necessary adaptations, to implementation of the Odisha Goods and Services Tax Act, 2017. The circulars are clarificatory and are applied to ensure uniformity. Implementation difficulties may be brought to the attention of the state tax commissioner.
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GST inspection payments: missing acknowledgment and unconsidered refund representation result in refund and permission for manual appeals.
Case-Laws
GST
Non-issuance of a Form GST DRC-04 acknowledgment for GST payments made during inspection rendered the proceedings concluded in Form GST DRC-05 invalid. The representation disputing the payments and seeking a refund had not been considered. Delay in submitting it did not alone justify rejecting the claim, given the family wedding coinciding with the inspection and related customary formalities. The orders were set aside, and refund of IGST, CGST and SGST was directed within eight weeks of receipt of the order. Manual appeals were permitted within twelve weeks.
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Family-member surety requirements can be modified when inability to comply prevents release despite bail and affects personal liberty.
Case-Laws
GST
The benefit of bail cannot be denied merely because an accused cannot furnish the bail bond in the prescribed manner, as withholding it on that ground affects the right to personal liberty under Article 21 of the Constitution. Where a family-member surety requirement prevents release, it may be modified to permit two local solvent sureties and additional cash security. The security is to be held in an interest-bearing account at a nationalised bank, renewable until conclusion of the trial and subject to its final outcome. The remaining bail conditions stay intact.
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Principal-to-principal overseas services qualify as exports when statutory conditions are met, supporting input tax credit refunds.
Case-Laws
GST
Intermediaries arrange or facilitate supplies for others, while services supplied on a principal-to-principal basis on the supplier's own account are not intermediary services. Such services to overseas group entities qualify as exports where the recipient and place of supply are outside India, payment is received in convertible foreign exchange, and the Indian supplier and foreign recipient are separately incorporated. Qualifying exports support refunds of unutilised input tax credit with statutory interest. Principal Bench jurisdiction applies to refund appeals involving place of supply, including where intermediary status determines it. Refund rejection grounds must be specified in the show-cause notice and appellate findings reasoned; inadequately communicated grounds violate natural justice.
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Railway construction GST concessions require a qualifying composite works contract, not merely services supplied to the railways.
Case-Laws
GST
The concessional 12% GST rate for railway construction requires a composite supply of works contract relating to immovable property. Classification as construction services or supply to the railways alone does not establish eligibility. For railway earthwork, bridge and allied services, invoices described general construction services and a qualifying composite works contract was not established. The services attracted 18% GST rather than the concessional rate.
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Delayed GST refund interest remains payable despite electronic credit ledger payment or payment exceeding the statutory pre-deposit.
Case-Laws
GST
Section 56 provides for interest where an admissible GST refund is not granted within 60 days of receipt of the refund application. Interest cannot be denied solely because disputed tax was paid through the Electronic Credit Ledger and the debited input tax credit was restored through FORM GST PMT-03 after the demand was set aside. Sections 107(6) and 107(7) prescribe minimum payments for an appeal and the statutory stay of recovery, not a ceiling on payment. Paying the entire disputed demand does not waive entitlement to otherwise payable statutory refund interest.
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Suppressed outward supplies require transaction-wise verification and reasoned findings before diary entries can support tax and penalty determinations.
Case-Laws
GST
Suppressed outward supplies cannot be established by aggregate diary figures without a demonstrable factual basis. A reasoned determination requires identification and entry-wise examination of relevant transactions, reconciliation with accounts and statutory returns, and consideration of the taxpayer's explanations and supporting evidence. Missing invoices or books during investigation do not alone establish suppression; subsequently produced invoices and claims of disclosure in GSTR-1 also require verification. Consequential tax and penalty must be determined through a reasoned decision after a reasonable opportunity of hearing.
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Incomplete or expired e-way bills without valid explanation attract penalties despite matching invoices and asserted absence of tax evasion.
Case-Laws
GST
Incomplete or expired e-way bills can attract a penalty under Section 129(3) when goods are transported without a valid explanation. A valid e-way bill requires completed Parts A and B, including vehicle particulars. The registered person causing movement remains responsible for valid transit documentation despite transporter negligence. Compliance must exist at interception; later updates to vehicle details or disclosure in GSTR-1 returns do not cure the breach. Matching goods and invoices, or an asserted absence of intent to evade tax, do not justify waiver where the documentation defaults lack a substantiated explanation.
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Bunched export refund appeals require a Division Bench when their combined value exceeds the ceiling or legal interpretation arises.
Case-Laws
GST
For bunched appeals, Section 109(8) of the CGST Act, read with Rule 110A of the CGST Rules, permits placement before a Single Member Bench only with the President's approval, if their cumulative value does not exceed Rs. 50 lakh and no question of law arises. Rejection of an IGST refund is a denial of entitlement, rather than a determination against the taxpayer of tax, input tax credit, fine, fee or penalty under that provision. Whether the amending notification is curative and retrospective or substantive and prospective raises a question of law requiring Division Bench consideration. Retrospective operation and refund entitlement remain to be determined on merits.
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Paper bags made from kraft, greaseproof and glassine paper attract concessional GST, with input tax credit subject to conditions.
Case-Laws
GST
Kraft, greaseproof and glassine paper bags made using adhesive glue fall under HSN 48194000 as other sacks and bags, including cones, within heading 4819. They are not covered by the specified GST exemption notifications and attract GST at 5% under Entry 319 of Schedule I, comprising 2.5% central tax and 2.5% state tax. Input tax credit on inputs and input services used to manufacture these taxable bags is available subject to the conditions in section 16 of the CGST and TNGST Acts.
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Unaccounted tobacco stock found during survey attracts tax determination instead of direct confiscation, penalty and fine.
Case-Laws
GST
Unaccounted tobacco stock discovered during a survey is subject to tax determination under sections 73 or 74 of the CGST/UPGST Act rather than direct confiscation, penalty and fine under section 130. Section 35(6), read with section 35(1), permits the proper officer to determine tax on unaccounted goods as if they had been supplied. A departmental appeal under section 112 against a rectification that merely corrects an omission in an appellate order is not maintainable when the original appellate order remains unchallenged.
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Expired e-way bills and vehicle number mismatches can attract transport penalties where circumstances establish an intention to evade tax.
Case-Laws
GST
An expired e-way bill is treated as no e-way bill for transport under section 129(1) of the CGST/UPGST Acts read with rule 138 of the CGST Rules. Fiscal penalties are civil liabilities and do not require mens rea unless the provision incorporates it, but the department must show an intention to evade tax under section 129, which may be inferred from surrounding circumstances. An incomplete e-way bill raises a rebuttable presumption of that intention. Penalty applied where Part-B showed a different vehicle number and the breakdown explanation lacked reliable contemporaneous support, although the goods, invoice and consignment note were otherwise in order.
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Departmental appeal limits permit discretionary exceptions, while penalties for technical e-way bill lapses in genuine transactions require evasion intent.
Case-Laws
GST
The monetary limit for departmental appeals does not apply where the State Tax Commissioner considers a contest necessary in the interests of justice or revenue. That opinion cannot be challenged, and the Commissioner need not state reasons. For a technical failure to complete e-way bill Part B in an otherwise genuine transaction, penalty under section 129 requires an intention to evade tax supported by material and reasoned findings. Genuine documents accompanying the goods can rebut a presumption of evasion; a pre-movement e-invoice can disclose the transaction on the portal and auto-populate GSTR-1.
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