Indirect Tax News Letter December 2025

Indirect Tax News Letter

GST Calendar –Compliances for the month of December ’2025

Nature of Compliances Due Date

GSTR-7 (Tax Deducted at Source ‘TDS’) January 10, 2026

GSTR-8 (Tax Collected at Source ‘TCS’) January 10, 2026

GSTR-1 January 11, 2026

IFF- Invoice furnishing facility (Availing QRMP) January 13, 2026

GSTR-6 Input Service Distributor January 13, 2026

GSTR-2B (Auto Generated Statement) January 14, 2026

GSTR-3B January 20, 2026

GSTR-5 (Non-Resident Taxable Person) January 20, 2026

GSTR-5A (OIDAR Service Provider) January 20, 2026

PMT-06 (who have opted for QRMP scheme) January 25, 2026

GST Update – December 2025

GST, Export-related GST implications, Customs & Indirect Taxes

December 2025 witnessed important indirect tax developments impacting exporters, SEZ units, valuation principles, jurisdictional overlap between Central and State authorities, and digitization of customs processes. Judicial scrutiny during the month continued to reinforce statutory discipline, transactional valuation, and procedural fairness, while regulatory changes provided tangible relief in export-related compliance.

1. FEMA Timeline Extensions

The Reserve Bank of India has amended FEMA regulations to extend:

The time limit for realization and repatriation of export proceeds from 9 months to 15 months

The permissible period for shipment of goods against advance receipts from 1 year to 3 years

GST Implications

These extensions have a direct bearing on GST compliance, particularly in the following areas:

Export of Services:

Since GST law does not prescribe an independent timeline for receipt of consideration, FEMA timelines are determinative. The extended 15-month period strengthens exporters’ ability to establish export status even where remittances are delayed.

Exports under LUT (Rule 96A):

The requirement to realize export proceeds within one year or within the period permitted under FEMA is now substantially relaxed. This reduces the immediate risk of IGST demand with interest merely due to delayed realization.

Refund Recovery (Rule 96B):

Refunds already sanctioned are recoverable only if FEMA timelines are breached. The extension effectively postpones refund recovery exposure and improves cash flow certainty for exporters.

2. Goods and Services Tax – Key Judicial Pronouncements

a. Cross-LoC Trade Held to be Intra-State Supply

The Jammu & Kashmir High Court held that trade conducted across the Line of Control constitutes intra-state supply for GST purposes. The Court emphasized that:

Legal territorial sovereignty prevails over administrative or de facto control

Both the supplier and place of supply continue to fall within the same State/UT

The Court also upheld the validity of composite SCNs covering multiple financial years, provided:

Year-wise quantification is available

Limitation is independently satisfied for each period

Allegations are clearly articulated

b. Refund of ISD-Distributed ITC Allowed to SEZ Units

The Gujarat High Court reaffirmed that:

SEZ units are entitled to refund of unutilized ITC distributed through ISD

Refund eligibility cannot be denied on the ground that ITC originates centrally rather than from direct suppliers

The Court recognized the commercial impracticality of suppliers claiming refunds in ISD structures and held that refund entitlement follows the zero-rated supply, not the source of credit.

c. Constitutional Challenge to 180-Day ITC Reversal Rule

The Gujarat High Court issued notice in a writ petition challenging the validity of:

Mandatory ITC reversal (along with interest) where payment to suppliers is not made within 180 days

The challenge argues that:

The provision interferes with legitimate commercial credit arrangements

It indirectly regulates trade terms without legislative competence

It violates constitutional guarantees under Articles 14 and 19(1)(g)

d. MRP-Based Compensation Cess Struck Down

The Karnataka High Court invalidated notifications mandating levy of compensation cess based on MRP instead of transaction value for specified tobacco products.

The Court held that:

Section 15 valuation principles apply wherever cess is levied on value

Delegated legislation cannot override the parent statute

MRP is a notional construct and cannot replace actual consideration

e. Central Proceedings Valid Despite Prior State Action

The Chhattisgarh High Court clarified the scope of Section 6(2)(b) and held that:

Mere issuance of notices by State authorities does not bar Central proceedings

Only proceedings culminating in adjudication or demand qualify as “proceedings” under the Act

Where State action is abandoned or closed without adjudication, Central authorities retain full jurisdiction to proceed.