Tax Updates: July 2025

Thursday, July 3, 2025

Handling of Inadvertently Rejected records on IMS

Question 1: How can a recipient avail ITC of wrongly rejected Invoices/ Debit notes/ECO-Documents in IMS as corresponding GSTR-3B of same tax period was also filed by recipient?

Answer: In such cases recipient can request to the corresponding supplier to report the same record (without any change) in same return period’s GSTR-1A or respective amendment table of subsequent GSTR-1/IFF. Thus, recipient can avail the ITC basis on amended record by accepting such record on IMS and recomputing GSTR-2B on IMS. Here the recipient will get ITC of complete amended value as original record was rejected by the recipient.

However, recipient will be able to take ITC for the again furnished document by the supplier, as stated above, only in the GSTR-2B of the concerned tax-period.

Question 2: If any original record is rejected by the recipient and supplier furnishes the same record in GSTR-1A of same tax period or in the amendment table of GSTR-1/IFF of subsequent period, till the specified time limit, then what impact it will have on supplier’s liability?

Answer: In case supplier had furnished an original record in GSTR-1/IFF but the same record was rejected wrongly by the recipient in IMS. In such cases supplier on noticing the same in the supplier’s view of IMS dashboard or on request of recipient, may furnish the same record again (without any change) in GSTR-1A of same tax period or in the amendment table of GSTR-1/IFF in any subsequent period, till the specified time limit, then the liability of supplier will not increase. As amendment table take delta value only. Thus, in present case of same values, differential liability increase will be zero.

Question 3: As a recipient taxpayer, how to reverse ITC of wrongly rejected Credit note in IMS as the corresponding GSTR-3B has already been filed?

Answer: In such cases recipient can request the concerned supplier to furnish the same Credit note (CN) without any change in the same return period’s GSTR-1A or in amendment table of subsequent period’s GSTR-1/IFF. Now recipient can reverse the availed ITC based on the amended CN by accepting the CN on IMS. Hence, the recipient’s ITC will get reduced with complete amended value, as soon as the recipient recomputes GSTR-2B on IMS. The reduced value is same as that of the value of original CN as in this case the complete original CN was rejected by the recipient.

Question 4: If any original Credit note was rejected by the recipient and supplier furnishes the same credit note in GSTR-1A of same tax period or in the amendment table of GSTR-1/IFF of any future tax-period, till the specified time limit, then what impact it will have on supplier’s liability?

Answer: At first instant the supplier’s liability will be added back in the open GSTR-3B return, because of original credit note rejection by the recipient. However, as the supplier furnishes the same credit note in GSTR-1A of same tax period or in amendment table of GSTR-1/IFF in any subsequent period, supplier’s liability for this amendment will get reduced again corresponding to the value of amended CN (which in this case is same as original). Thus, net effect on liability of supplier will be only once.

Thanking You,
Team GSTN

Source : https://www.gst.gov.in/newsandupdates/read/613

Mangoes, Misinterpretations & the Law: Gujarat HC serves a tangy verdict on GST!

The Gujarat High Court recently delivered a significant verdict regarding the Goods and Services Tax (GST) applicable to mango pulp. This decision brings much-needed clarity for businesses in the food processing industry, particularly those dealing with mango-derived products.

Here's a breakdown of the key aspects of the case and the court's ruling:

The Dispute:

A supplier, Harshad Mango Products , argued that mango pulp should be taxed at a 5% GST rate, claiming it was derived from sliced and dried mangoes which attract the concessional 5% rate.
The tax department, however, asserted that mango pulp falls under the category of "mangoes other than sliced and dried" and is subject to a 12% GST rate, citing relevant notifications and a clarification circular.

The Gujarat High Court's Verdict (Harshad Mango Products Pvt. Ltd vs Union Of India on 23 April, 2025):

The High Court upheld the department's position, ruling that mango pulp is taxable at 12% GST.
The court clarified that mango pulp is neither fresh mango (which is GST exempt) nor sliced and dried mangoes.
It emphasized that the 12% rate has been in effect since the introduction of GST in July 2017, and the relevant notifications and circulars merely served as clarifications, not retrospective amendments.
The court also rejected the revenue officials' contention that mango pulp should attract an 18% GST under the residual entry for items not specifically categorized.

Key Legal Observations:

The court referred to its previous decision in Vimal Agro Products Pvt. Ltd. v. Union of India on 24 April, 2024, where a similar issue regarding mango pulp GST was addressed.
It noted that the Harmonized System of Nomenclature (HSN) Chapter 08.04, which covers edible fruits and nuts, only refers to fresh or dried mangoes, not pulp.
Entry 30A of Schedule I, which offers a 5% rate, specifically applies only to sliced and dried mangoes.
The court confirmed that Circular 179/11/2022 and Notification 6/2022 were clarificatory in nature, reinforcing the existing 12% GST rate on mango pulp.

Implications for Businesses:

Companies involved in the production and sale of mango pulp need to ensure they have been consistently applying the 12% GST rate since July 2017.
Businesses that applied lower rates may face back tax assessments and potential penalties.
This ruling emphasizes the importance of correctly classifying products and understanding the applicable GST rates to avoid disputes with tax authorities.

In essence, the Gujarat High Court's "tangy verdict" affirms that mango pulp falls under the 12% GST category, putting an end to past interpretations and providing a clear framework for tax compliance in the mango processing industry.

GST Dispute Hits Dabur’s Hajmola: Ayurvedic Medicine or Candy?

The Directorate General of GST Intelligence (DGGI) has issued a show-cause notice on Hajmola, a popular product of Dabur known for its digestive properties, for the issue of classification. The problem is whether the same must be deemed as a normal candy or an Ayurvedic preparation.

After the investigation, the Show Cause Notices (SCN) have been issued. The company had received a summons earlier. Before the investigation, they made specific submissions. The problem is that if this is a normal candy or an Ayurvedic preparation.

There is an 18% GST for normal candy and a 12% on Ayurvedic preparations. The company does not respond to new developments till the time of proceeding to the press.

An identical issue was introduced in the pre-GST regime when the Supreme Court in 2002 had dismissed an appeal of the Commissioner of Central Excise, Chandigarh, against a ruling by the erstwhile CEGAT (Central Customs, Excise & Gold Appellate Tribunal, now known as the Customs Excise and Service Tax Appellate Tribunal or CESTAT), which CEGAT repeated that Hajmola Tablets are Ayurvedic medicines.

In another ruling by the Allahabad High Court in 2016, when Uttar Pradesh’s Commercial Tax Department appealed against a ruling via a tribunal which ruled that ‘Chyawanpras,’ ‘Hajmola’ and ‘Hajmola Candy’ are medicines for tax.

The Department contested the ruling by asking: “Whether, on the facts and circumstances of the case, the tribunal was legally justified in holding ‘Chyawanprash,’, ‘Hajmola’ and ‘Hajmola Candy’ to be medicines even though they are not sold in the medical shops but rather in general stores?”

The court observed the tribunal’s statement, which expressed that Dabur India has manufactured all three products for many years under a license granted to it by the licensing officer of Ayurvedic and Unani Services under the Drug and Cosmetics Act, 1940.

The tribunal ruled that for any product manufactured under a license for a drug, the nature of the product would be that of a medicine.

The court, the matter of Lal Dant Manjan, which is manufactured based on a license issued under the Drugs and Cosmetics Act and would be treated as a medicine or drug.

“The place of sale of any product is not a relevant criteriona for determining its nature as to whether it is a drug/medicine or an item of general use;, rather, the relevant criteriona is the license under which such a product is being manufactured, and if the license is for the purposes of manufacturing a drug or medicine under the relevant statute, the product would essentially be a drug/medicine,” it expressed while dismissing the appeal by the tax department.

After doughnuts, Hajmola candy is the latest case of misclassification. DGGI imposes Rs 100 crore tax notice on Mumbai-based MOD for allegedly misclassifying its doughnut.

A 5% GST rate on doughnuts, the chain has been charged, asserting they are entitled to restaurant services rather than the 18% tax applicable on bakery items. The notice has been stayed, but the case is pending in the Bombay HC.

SBI Cards gets GST show cause notice for ₹81.93 crore over input tax credit claims

Leading pure-play credit card issuer SBI Cards and Payment Services Ltd on Tuesday (July 1) said it has received a show cause notice from the Additional Commissioner (East 1), CGST Gurugram, proposing to disallow input tax credit (ITC) amounting to ₹81.93 crore.

The notice, issued on June 30, 2025, covers the assessment period from FY 2018-19 to 2020-21 and was shared with exchanges on July 1.

As per the show cause notice, the proposed disallowance includes ₹81.45 crore due to mismatches between GSTR-2A and GSTR-3B filings and ₹47.53 lakh related to supplies from vendors whose GST registrations were cancelled retrospectively or who failed to file GSTR-3B.

The total demand is being considered under Section 74(1) of the Central Goods and Services Tax Act, 2017, read with corresponding provisions of the SGST and IGST Acts.

The company has been asked to show cause within 30 days of the notice as to why the ineligible ITC should not be recovered along with interest under Section 50 of the CGST Act and a penalty equivalent to the ITC claimed.

The total ITC under dispute comprises ₹63.55 crore under IGST, ₹8.89 crore under CGST, and ₹8.99 crore under SGST. SBI Cards maintains that it has availed credit in compliance with GST law and is confident that the demand will be dropped. The company believes it has a strong case on merits and expects a favourable outcome.

Shares of SBI Cards and Payment Services Ltd ended at ₹932.35, down by ₹18.55, or 1.95%, on the BSE.

GST Fraud in Madhya Pradesh: ₹130 Cr Fake ITC Scam Exposed

The Madhya Pradesh Economic Offences Wing (EOW) has recently unearthed a massive ₹130 crore GST fraud involving fake Input Tax Credit (ITC). The case highlights the growing misuse of GST registration systems for availing illegal tax credits through shell companies and bogus invoices.

Let’s break this down to understand how such scams work, what legal provisions apply, and how taxpayers and consultants can safeguard themselves.

What is Fake Input Tax Credit (ITC)?

Fake ITC refers to claiming tax credit on invoices for which no actual supply of goods or services took place. It is one of the most common GST fraud methods.

Key characteristics of fake ITC fraud:

Use of non-existent or paper-only firms
No movement of goods/services
Bogus GST invoices
ITC passed on without tax payment to the government

Madhya Pradesh Case: How the ₹130 Cr Scam Was Run

According to the EOW investigation:

A group of individuals created over 50 fake GST-registered firms
These shell companies issued bogus invoices to each other and to genuine firms
Fake ITC worth ₹130 crore was claimed and passed on
The scam was run across multiple states using forged documents

Legal action:

FIR filed under IPC and CGST Act, 2017
Arrests are likely under Sections 132(1)(b), (c), and (f) of the CGST Act
Properties and bank accounts are being frozen

GST Law on Fake ITC: What Does Section 132 Say?

Under the Central Goods and Services Tax (CGST) Act, 2017, Section 132 deals with offences and penalties for GST frauds, including fake ITC.

Key penalties:

Offence	Amount Involved	Punishment
Fake ITC without supply	> ₹5 Cr	Jail up to 5 years + fine
Repetition of offence	Any amount	Non-bailable offence
Fake invoices	> ₹2 Cr	Cognizable and non-bailable

Also, the GSTR-3B and GSTR-1 filings are now more strictly scrutinised with data analytics and AI tools by GSTN to catch such anomalies.

Red Flags That Signal Fake ITC Risk

To stay compliant, look out for these signs in your vendor ecosystem:

Suppliers without e-way bill or delivery proof
Vendors not filing GSTR-3B or GSTR-1 regularly
Large purchases from new/unverified GSTINs
Tax mismatch in GSTR-2B vs. GSTR-3B

🔍 Tip: Use the GST portal to verify vendor return filing status and GSTIN authenticity.

How to Report or Avoid GST Frauds

If you’re a taxpayer or consultant:

Conduct due diligence before onboarding vendors
Reconcile GSTR-2B with GSTR-3B monthly
Avoid availing ITC if supplier has defaulted in tax payment
Use tools or consultants to check ITC validity

To report fraud:

Visit the official GST grievance redressal portal:
🔗 https://selfservice.gstsystem.in/

Legal Consequences for Involved Persons

Fraudsters may face:

Arrest without warrant
Seizure of property and bank accounts
Reversal of entire ITC with interest (Sec 73/74)
Prosecution under IPC for forgery, cheating, criminal conspiracy

Even buyers who knowingly receive fake invoices can be penalised under Section 122 of the CGST Act.

Protecting Your Business from Fake ITC Issues

✅ Register vendors with known credentials
✅ Use e-invoicing and proper documentation
✅ Reconcile GST returns monthly
✅ Keep proofs of goods received and tax paid
✅ Avoid dealing in cash-heavy sectors with no traceability

Conclusion

The ₹130 crore GST fraud in Madhya Pradesh is a reminder of how serious fake ITC scams have become. We advises all taxpayers and consultants to follow due diligence, ensure return reconciliation, and avoid shortcuts.

Wednesday, July 2, 2025

15 Dangerous GST Violations You Might Be Making in GST Returns Filing! check now

Even well-intentioned taxpayers face GST penalties due to complex rules and overlooked compliances. Here are 15 major GST return violations—many of which are not visible at surface level but can cause notices, ITC reversal, interest, or even audit.

1. ❌ Wrong Filing in GSTR-1 Auto-Populates Incorrect GSTR-3B

Once you file GSTR-1 wrongly, it auto-fills 3B, and with portal restrictions increasing, manual corrections may not be allowed. Avoid mismatch in output tax and outward supplies.

2. ⚠️ Non-Reversal of ITC under Rule 37A – Supplier Didn’t Pay Tax

Rule 37A mandates reversal of ITC if the supplier doesn’t deposit GST in their GSTR-3B by the 30th November of the next financial year. Recipient must track compliance of vendors or risk reversal and interest!

3. 📉 No Reconciliation with GSTR-2B

2B is the final document for eligible ITC—not 2A. Ignoring reconciliation will lead to over-claimed ITC, which the system or officers can catch, leading to reversal with penalty.

4. 💸 Purchase from Cancelled GSTINs

Claiming ITC on purchases from suppliers whose GSTIN is cancelled is invalid. This is easy to overlook unless vendor status is regularly checked on the portal.

5. 🔐 Non-Compliance with Rule 86B

If monthly turnover exceeds ₹50 lakh, 1% of GST must be paid in cash. Ignoring this can lead to system restrictions or filing blockage.

6. 📆 Failure to Pay Vendors Within 180 Days

Under Section 16(2), if payment isn’t made within 180 days, ITC must be reversed with interest, and can only be reclaimed after actual payment. This is a red flag in assessments.

7. 🧮 ITC Reversal for Exempt Supplies Not Done (Rule 42/43)

If you deal in both taxable and exempt goods/services, a proportionate reversal under Rule 42 (inputs/services) & 43 (capital goods) is mandatory, but frequently skipped.

8. 🪙 Miscellaneous Incomes Not Reported

Scrap, commission, penalties, forex gains — all such miscellaneous incomes are taxable. They must be disclosed in outward supplies or else mismatches will occur with ITR.

9. 🔍 No GST Paid on Advance Received

For certain goods and all services, GST is applicable on advance receipt. If not declared properly, mismatches between books and GSTR-1/3B arise.

10. 🧾 RCM Liability Ignored on Common Expenses

Expenses like freight (GTA), advocate fees, rent from unregistered persons, director remuneration may attract RCM. Not discharging this liability = non-compliance + ITC ineligibility.

11. 🧯 Incorrect Valuation of Related Party Transactions

Even if no consideration is involved, GST valuation rules apply to transactions with sister companies, branches, or directors. Use open market value or Rule 28 provisions.

12. 🧷 Late GSTR-1 Filing – No Late Fee, But Notice Still Possible

Many think they’re safe if no late fee shows on portal, but officers can issue notice under Section 46 or 122, demanding penalty for late filing.

13. 🧾 Capital Goods Supplied but ITC Not Reversed as per Rule 40(2)

When capital goods or plant & machinery are sold, transferred, or disposed of, the remaining Input Tax Credit must be reversed.

As per Rule 40(2) of CGST Rules, ITC is reduced by 5% per quarter (or part) from the date of invoice till the date of disposal. If not reversed or taxed correctly, this attracts GST audit objections and recovery with interest.

Example: If a machine purchased in Jan 2023 is sold in June 2025 (i.e., 10 quarters later), 50% of ITC (5% × 10) must be reduced from the originally claimed ITC, and only the balance can be retained or taxed on the transaction value—whichever is higher.

14. 📊 Wrong HSN/SAC Code Reporting

Incorrect HSN/SAC leads to rate mismatch, especially now with auto-mapping of e-invoices & e-way bills. Mandatory HSN disclosure applies to most taxpayers.

15. 🧾 Incorrect Reporting in Table 4 of GSTR-3B

Misplacing RCM ITC, import ITC or credit notes in wrong heads can lead to mismatches in GSTR-9 and audit flags.

Income Tax changes – Effective 1 July 2025

Significant updates are coming into effect on 1 July 2025 relating to PAN-Aadhaar linkage, ITR forms, e‑filing utilities, and payment deadlines. Here’s what you need to know:

1️. Aadhaar Mandatory for New PAN Applications

From 1 July 2025, applicants seeking a new PAN card must link Aadhaar—no alternative ID proofs will be accepted. This aims to curb duplicate/fake PANs and strengthen identity verification.

2️. PAN–Bank Account Link API Live

From June 17, 2025, the I-T portal supports real-time PAN–bank account verification via the NPCI API. This enhances refund processing and reduces erroneous filings.

3️. Extended ITR Filing Deadline—September 15, 2025

Originally due on 31 July 2025, ITR forms for AY 2025–26 can now be filed until 15 September 2025 (for non-audit taxpayers)—an additional 46 days. However:

Any final/ self‑assessment tax must still be paid by 31 July 2025 to avoid interest and penalties.

4️. ITR Forms & Utility Upgrades

Changes have been made across ITR forms (AY 2025–26):

Form	Key Updates
ITR‑1 / ITR‑4	Eligible now for limited LTCG (≤ ₹1.25 Lakh); Aadhaar enrolment field
ITR‑2 / ITR‑3	Separate reporting of capital gains split before/after 23 July 2024; share buyback gains require disclosure of dividend income
ITR‑5, ITR‑6	Updates similar to ITR-2 for trust and company filings
New ITR‑U Form	Enables correction of past returns (voluntary filing) as per Budget 2025; eligibility, deadlines, and penalties defined

5️. Revised Tax Slabs & Deductions (FY 2025–26)

As per the Budget 2025, the new tax regime (default from FY 2025–26) includes:

Zero tax up to ₹12 lakh
Slabs:

₹4–8 Lkh: 5%
₹8–12 Lkh: 10%
₹12–16 Lkh: 15%
₹16–20 Lkh: 20%
₹20–24 Lkh: 25%
Above ₹24 Lkh: 30%

Standard deduction ₹75,000
Section 87A rebate ₹60,000 → zero tax effectively up to ₹12 lakh

6️. Deadline for Tax Payments – 31 July 2025

Though the filing window extends to September, all tax dues—including final/self-assessment taxes—should be paid by 31 July 2025 to avoid interest.

✅ Action Checklist

👉 PAN Applicants: Link Aadhaar before applying.
✅ Bank Verification: Ensure PAN is linked to a bank account via portal.
🛂 Download ITR Forms: Excel utilities for ITR‑1/4 are ready.
📊 Select Correct ITR Form:

Use ITR‑1/4 if LTCG ≤ ₹1.25L and conditions met.
Use ITR‑2/3 for complex incomes.

⏳ Pay Taxes by 31 July to avoid interest.
📝 File Return by 15 Sept under extended deadline.

📢 Important GST Changes from 1st July 2025

As the new quarter begins, taxpayers must prepare for critical GST compliance reforms taking effect from 1 July 2025. These include non-editable GSTR-3B, a 3-year filing cut-off, and upgraded e-way bill systems.

✅ 1. GSTR-3B Will Become Non-Editable (New Auto-Population Rule)

Effective From: Returns for July 2025 period (filed in August 2025)

GSTR-3B liability values will be auto-populated from GSTR-1, IFF, or GSTR-1A
These values will be non-editable
Errors must be corrected via Form GSTR-1A (newly introduced) before filing GSTR-3B

📌 Action Required: Carefully review GSTR-1/IFF data and amend via GSTR-1A if needed
📅 Reference Advisory Date: 7th June 2025

✅ 2. 3-Year Limit for Filing Past GST Returns (No More Backfiling)

Effective From: 1 August 2025 (for returns due ≥3 years ago)

Returns covered:

GST Return Type	Blocked From Filing After
GSTR-1 / IFF	June 2022
GSTR-3B	June 2022
GSTR-4	FY 2021–22
GSTR-5 to GSTR-8	June 2022
GSTR-9 / 9C	FY 2020–21

🛑 If not filed by 31st July 2025, these returns will be permanently barred from the portal.

📅 Reference Advisory Date: 18th June 2025

✅ 3. E-Way Bill Portal 2.0 Goes Live (Inter-Operable with 1.0)

Launch Date: 1 July 2025
New Portal: ewaybill2.gst.gov.in

🔄 Fully integrated with E-Way Bill 1.0 for:

Generating or extending E-Way Bills
Updating vehicle or transporter info
Creating consolidated E-Way Bills
API-based access for businesses

✅ Syncs both portals in real-time
✅ Ensures business continuity during outages

📅 Reference Advisory Date: 16th June 2025

🧾 Summary:

What You Need To Do After 1 July 2025

Task	Deadline	Action
File returns older than 3 years	31 July 2025	Prevent permanent block from 1 August
Prepare for non-editable GSTR-3B	From 1 July 2025	Start using GSTR-1A for corrections
Update E-Way Bill APIs	From 1 July 2025	Use new portal for improved functionality

🗓️ GST DUE DATES FOR JULY 2025

📆 Due Date	🧾 Form	📝 Description
10 July	GSTR‑7	TDS return under GST
10 July	GSTR‑8	TCS return by e-commerce operators
11 July	GSTR‑1	Monthly return for outward supplies (turnover > ₹5 Cr)
13 July	GSTR‑1 & GSTR-5	QRMP scheme (for June Qtr)
13 July	GSTR‑6	GSTR‑3B
20 July	GSTR‑3B & GSTR-5A	Monthly return (taxpayers > ₹5 Cr or opted for monthly)
22 July	GSTR‑3B	Quarterly filers (QRMP) for Group A states (Chhattisgarh, MP, Gujarat, Maharashtra, Karnataka, Goa, Kerala, TN, Telangana, Andhra Pradesh, etc.)
24 July	GSTR‑3B	Quarterly filers (QRMP) for Group B states (Delhi, Punjab, Haryana, HP, JK, UP, Uttarakhand, WB, NE states, Bihar, Jharkhand, Rajasthan)
30 July	ITC-04	Job work declaration for April–June 2025 (if applicable)