GST Reforms Ahead
GST Council Plans October Reforms While Courts Uphold Key Taxpayer Protections
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Key Points
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The sulphur taxpayer sought ₹64.78 lakh for May 1–31, 2022, but the refund authority sanctioned ₹63,19,046; the department argued on appeal that no inverted-duty refund was available because the same sulphur was purchased and sold at the same 5% GST rate.
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In the Gujarat industrial-plot dispute, Kor Chems paid ₹29.25 lakh in GST to the assigning lessee, Myspace Infracon, and claimed that amount as ITC. The department treated the credit as blocked under Section 17(5)(d), sought reversal with interest and imposed an equivalent penalty under Section 74.
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The Calcutta High Court directed the company to file a comprehensive reply within three weeks to the separate notice issued under Section 61 read with Rule 99, and ordered the authority to issue a speaking, reasoned decision after a personal hearing.
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A registration reform already introduced an electronic route for eligible taxpayers whose monthly output-tax liability on supplies to registered persons does not exceed ₹2.5 lakh; reports suggest the Council may consider standardising the process for other applicants.
India's GST system is tightening protections for legitimate taxpayers while courts block improper credit denials. ANI News reports that the GST Council will consider reforms in October 2026 to shield buyers from losing input tax credit when suppliers default. Meanwhile, recent tribunal and high court rulings have overturned department penalties and restored refunds for taxpayers caught in technical disputes over credit eligibility.
The reforms signal a shift toward procedural clarity rather than rate changes. Courts are increasingly requiring authorities to provide hearings and written reasoning before denying credits, while tribunals are examining whether taxpayers qualify for relief when faced with inverted-duty scenarios or supplier-related complications.
Sulphur Refund Win: ₹63 Lakh Restored in Inverted-Duty Case
A packaging company secured a ₹63.19 lakh refund after the GST Appellate Tribunal in Kolkata sided with its claim for accumulated input credit. The taxpayer bought packaging inputs taxed at 18% but sold packaged sulphur at 5%, creating a mismatch. The department denied the refund, arguing both purchase and sale occurred at 5%. The tribunal disagreed and awarded the refund for May 2022.
Industrial Plot Assignment: Courts Split Credit Between Buyer and Seller
A Gujarat High Court ruling clarified that leasing an industrial plot and later assigning those rights are two separate GST transactions. When Kor Chems paid ₹29.25 lakh in GST to assignor Myspace Infracon and claimed input credit, the tax department blocked it under Section 17(5)(d). The department also demanded reversal with interest and imposed an equal penalty. The dispute hinges on whether the assignee qualifies for credit on what it views as a genuine business expense.
High Court Overturns Registration Suspension Without Hearing
The Calcutta High Court set aside a notice suspending a company's GST registration over alleged input tax credit mismatches. The court ruled the authority had no right to suspend without first hearing the company's side. It ordered the company to file a detailed reply within three weeks and directed the authority to issue a written, reasoned decision after a personal hearing. The ruling reinforces that agencies must follow procedural fairness.
Council Eyes Procedural Reforms, Including Registration Overhaul
Ahead of its October 2026 meeting, the GST Council is weighing reforms focused on registration, input credit protection and faster dispute resolution. Tax Guru notes that an electronic registration route already exists for eligible taxpayers whose monthly output-tax liability to registered buyers does not exceed ₹2.5 lakh. The Council may standardize this process and expand protections for genuine buyers harmed by supplier defaults. Experts expect procedural fixes rather than rate changes.
Mid-Day reports the Council is also examining whether employers should claim input credit on group health and life insurance premiums paid for employees. Currently, these premiums carry an 18% GST levy. Allowing credit would ease compliance for businesses and widen the credit base—a form of procedural relief that sidesteps rate increases.
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