Tax Vista

Your weekly tax recap

Edn. 293 - 12th October 2026

Dr. G. Gokul Kishore

GST Council Meeting - Certain major decisions

GST Council met on 8th October, 2026 and took certain major decisions. The official press release got slightly delayed and someone prepared something called notes and circulated it in WhatsApp. By now, at least a hundred webinars have been organized to assist taxpayers who have been desperately seeking guidance on the issues discussed in the meeting. The meeting itself, it seems, devoted lot of time in apparently reforming registration related processes. Even if the navigation in the portal is smooth and everything is online, most of the applicants for registration are called to meet the officer in person. The average bribe per registration is Rs. 10,000 though a few are granted free of cost. GST Council can hardly do anything about it as corruption outlives every system and process.

A major recommendation is on scrapping arrest power. Power to arrest is more used by DGGI than jurisdictional officers and in many cases, it is used to threaten taxpayers to cough up huge cash deposits at ghostly hours. The power is a relic of Customs law which made it to excise regime and has long become anachronistic in a business law like GST. Press release carries measures relating to Section 69, Section 129 and Section 130 in bold font probably to convey that the Council is very much concerned over the use / abuse of these provisions. Instead of half-hearted reforms like no interception of vehicles in in-transit States, abolition of e-way bill along with omission of Section 129 will go a long way to reform the system itself.

Dousing the fire over single SCN for multiple years through a validation clause has been recommended. What was never an issue in pre-GST regime, became a monster only because of linking annual return due date with limitation for SCN and passing orders. It has been stated in the Press Conference by the FM that amendment to Section 16(2)(c) and Section 17(5) will be examined by a Committee and then the same will be considered. These were widely speculated in the media but bona fide purchasers have been made to wait for now.

From day one till today, GST returns are eternally on reformist mode. GST Council has spent considerable time in discussing improvements in reconciliation between GSTR-1 and GSTR-3B, new rule to correct mismatch, etc. One of the most taxpayer-friendly reforms is the recommendation to provide for automatic refund of excess balance in electronic cash ledger. It is not known why refund claim is still required for cash balance and why it is even covered under Section 54 of CGST Act. It is taxpayer's money kept in GST portal from his bank account and government cannot have any lien over such wallet of the taxpayer. The press release mentions extending ITC refund to cover capital goods in case of exports and to both input services and capital goods in case of refund pertaining to inverted tax structure. Let us hope the devil is not in the details and the amendments actually get translated into real benefits for the otherwise harassed taxpayers who had to litigate upto the Apex Court.

One of the slightly difficult to understand conditions for export of services is that the service provider and recipient should not be mere establishments of distinct person. This provision is being omitted so that service exports to branch offices or other overseas offices will get export benefit. A non-related measure relates to new Annual Return Quarterly Payment Scheme. It is not known how QRMP has fared. Since the new scheme is to be confined to B2C suppliers, ITC flow to recipient may not be an issue. Once the notifications and circulars are issued, further discussion can be made.

Limitation for filing appeal by department starts from date of order

GST department is also "person aggrieved" when orders are in favour of taxpayers and the unwritten rule is almost all the orders should be challenged in appeals with the exception of refund related orders. These orders are generally against taxpayers and even if one or two stray claim gets sanctioned like Trump talking some sense in between, they must be appealed against without any exception. In this universe of universal appeals, limitation is not applicable to it, as the department feels.

Several refund orders were reviewed by the Commissioner as to "legality" and "propriety" and like any other review proceedings, in this case also, it was found all such orders sanctioning refund were neither legal nor proper. Therefore, appeals were filed before Appellate Authority by the department. The taxpayer objected to the appeals on the ground of time-bar which was anyway brushed aside by the Appellate Authority. The matter was carried to High Court which found the absurdity of the reasoning by Appellate Authority appalling. First, it was held in appeal that appeal was delayed because of post-audit. Gen Z practitioners may not be aware of pre and post audit of refund claims and AI will help them. The High Court held that 6 months from the date of communication of order is the time given to the department for filing appeal and date of conduct of audit or communication of observations is not relevant.

The department was unable to explain the delay of several months for communication of the order with another section in the same building. The Appellate Authority had viewed the delay as within condonable period but the High Court said date of issuance of order is the date of communication in respect of intra-departmental communication. Another Trumping argument by Appellate Authority was the time available to the department under Section 73 for recovery of erroneous refund. This was noted as not relevant for computation of limitation under Section 107 by the High Court.

Readers will be surprised that such a flawed case was taken up in appeal before Division Bench by the department since Singe Judge Bench had held against it. Unfortunately, for ease of doing business (of the lawyers), the matter will be carried to the Supreme Court also by the department [2026-VIL-1145-KAR].

Cash not covered under Section 67 and cannot be seized

GST Council can well take up a few judgments and recommend amendments to respective provisions commonly known as codification of judgments / case law. One of the judgments where almost all the High Courts (except MP HC) is non-sustainability of seizure of cash under Section 67 of CGST Act. Section 67 of CGST Act needs an amendment to categorically keep cash out of its ambit.

Before the Rajasthan High Court, confiscation of cash by the adjudicating authority was challenged. The seizure was supposedly on the belief that such currency represented proceeds of unaccounted taxable supplies and considering the sweep of Section 67 which empowers the authorities to seize goods, things, etc., cash was seized. The Court held that cash cannot be covered under "goods" because the definition in GST law excludes money. The department sought to justify using "thing" but the Court was not impressed. It said "things' should be read ejusdem generis with "documents" and "books" which all have evidentiary value and once examination is over, such items are liable to be returned while cash is not seized for examination. Income tax law and Customs law were compared.

The power has been clearly explained in the order - "The power of search and seizure is a serious invasion upon a person's proprietary and possessory rights. Such power must, therefore, be exercised strictly within the bounds of the statute. It is not open for us to expand its scope on considerations of administrative convenience or on the basis that cash may have some connection with an alleged tax contravention. If the legislature considers it necessary to confer a specific power to seize unaccounted cash or alleged sale proceeds in GST proceedings, it is for the legislature to enact such a provision."

The order is well-written as it specifically says that discovery of the goods allegedly without tax payment by itself does not raise the presumption that every sum found represented proceeds. The amount was directed to be returned along with interest [2026-VIL-1167-RAJ].

Withholding of refund - Provision drafted to punish exporters

In a Tamil movie, in a scene relating to driving license, the character will say "important document" is missing referring to currency note. Rejection of refund is very easy - just say documents have not been submitted without specifying what is found deficient. Against such rejection, Appellate Authority held otherwise. The department exercised power under Section 54(11) of CGST Act and refund was withheld with the possibility of filing appeal when GSTAT is constituted (during the relevant period). This provision empowers the Commissioner to withhold refund after offering a hearing if an appeal / other proceedings are pending. The taxpayer contended that contemplation of appeal cannot be a ground to withhold refund.

The Delhi High Court viewed some investigation undertaken by the department to point out that some investigation was underway against the taxpayer and hence the provision was rightly invoked. It is not clear whether the date mentioned as investigation being underway got crystallised at the time of passing order by the High Court. In the meanwhile, the department filed an appeal in GSTAT rendering the petition academic. The High Court's reasoning seems to be not clear and a stray investigation, non-correlation of dates and delay in listing and hearing the petition all went against the taxpayer [2026-VIL-1139-DEL].

ITC not deniable on retrospective cancellation of registration of supplier

It is often said that some fairplay in quasi-judicial proceedings can be expected only from the level of Tribunal. This gets vindicated when one reads a recent order of GSTAT. The amount involved is very small but the issue is universal - Input tax credit (ITC) whether can be denied on cancellation of registration of supplier with retrospective effect? The Delhi Bench of GSTAT decided the issue in favour of the taxpayer holding that ITC cannot be denied when the supplier had during the relevant time deposited the tax and there was otherwise no illegality found in the claim of the taxpayer. The order is worth reading a few times. The adjudicating authority had relied on CBIC instruction to which the Tribunal says - "The Instruction lays down a standard operating procedure for officers scrutinising returns, and Annexure B is a list of the parameters they are to look at. It tells the officer what to examine. It cannot add to Section 16 a disqualification that the Section does not contain, and it does not bind an authority deciding an appeal."

It noted that the supplier was registered at the time of issuance of invoice, reported the same in GSTR-1, details were reflected in GSTR-2A and bank statements proving payment. It took note of the fact that the supplier had filed GSTR-3B and it holds that such return cannot be filed without discharging liability. The Tribunal's order is eloquent when it points out that neither SCN nor adjudication order alleged that supplier failed to pay tax and the sole ground was payment was not verified. The order reads - "If the tax was not paid, the Department could have shown it in a line. It did not appear on either date of hearing before the first appellate authority, and it has produced nothing here. Sub-section (7) of Section 75 forbids a demand being confirmed on grounds other than those specified in the notice. A demand raised on the ground that the supplier's registration was cancelled cannot be defended in appeal on the different ground that the supplier may not have paid its tax, least of all when that ground is put forward as a doubt and not as a fact."

The department, it appears, was not able to defend such indefensible matters before the Tribunal as presumptions, fears and half-truths are packaged as genuine disputes. The order is unambiguous to note - "The learned Deputy Commissioner admits that the supplier has deposited the tax. His only reservation is that he is not sure whether the credit availed by the Respondent corresponds to that deposit. That is not a deficiency in the Respondent's claim. It is an uncertainty in the Department's own mind about its own records, and a demand cannot be founded on it."

The often relied upon sole case law of Ecom Gill Coffee by the department was also considered by the Tribunal. A welcome order on this issue where there are thousands of SCNs and orders only because of retro cancellation of supplier's registration. All this without bothering to verify an iota of fact wasting everyone's time and money [2026-VIL-186-GSTAT-DEL].

[The author is an Advocate. The view expressed are strictly personal.]