GST Update: Weekly Goods and Service Tax latest News – January 2026

GST WEEKLY UPDATE : 40/2025-26 (08.01.2026)

 1. Electronic Credit Reversal & Re-claimed Statement and RCM Liability / ITC Statement (GST Portal – Compliance & Validation Update) Date: 29 December 2025:

1. Background and Objective

To ensure accurate reporting, tracking, and regulation of Input Tax Credit (ITC) and to minimise clerical errors in Form GSTR-3B, GSTN has introduced system-based ledgers for:

• Tracking temporarily reversed ITC and its subsequent reclaim, and
• Monitoring Reverse Charge Mechanism (RCM) liability and corresponding ITC.

These system-driven statements aim to strengthen compliance discipline, enhance audit trails, and prevent excess or premature availment of ITC.

2.Electronic Credit Reversal & Re-claimed Statement (ITC Reclaim Ledger)

2.1 Introduction: The Electronic Credit Reversal and Re-claimed Statement was introduced on the GST Portal:

• From August 2023 return period – for monthly filers
• From July–September 2023 quarter – for quarterly filers

This statement tracks:

• Temporary reversal of ITC reported in Table 4(B)(2) of GSTR-3B, and
• Subsequent reclaim of such ITC reported in:
  • Table 4(A)(5), and
  • Table 4(D)(1) of GSTR-3B.

 2.2 System Behaviour (Current Position)

• If a taxpayer attempts to reclaim ITC in excess of available balance, a warning message is displayed.
• However, filing of GSTR-3B is presently allowed, despite such excess reclaim.

To facilitate smooth transition, GSTN provided multiple opportunities to taxpayers to declare opening balances representing ITC reversed earlier but not reclaimed at the time of ledger introduction.

Read Also: GST Revamp on the Horizon: What Businesses and Consumers Should Know

 2.3 Navigation Path

 Dashboard → Services → Ledger → Electronic Credit Reversal and Re-claimed

3.RCM Liability / ITC Statement (RCM Ledger)

 3.1 Introduction

To assist taxpayers in correct reporting of RCM transactions, GSTN introduced the RCM Liability / ITC Statement:

• From August 2024 onwards – for monthly filers
• From July–September 2024 quarter – for quarterly filers

This statement captures and tracks:

• RCM liability reported in Table 3.1(d) of GSTR-3B, and
• Corresponding ITC claimed in:
  • Table 4(A)(2) and
  • Table 4(A)(3) of GSTR-3B.

3.2 Warning Mechanism

A warning message is generated if:

 RCM ITC claimed exceeds the closing balance of the RCM ledger plus RCM liability reported in the current return.

Taxpayers were also given multiple opportunities to declare and amend opening balances for past-period RCM transactions.

 3.3 Navigation Path

 Dashboard → Services → Ledger → RCM Liability / ITC Statement.

4.Upcoming System Validation – Key Change

GSTN has now informed taxpayers that shortly, the system will not allow:

• Negative closing balances, or
• Availment of ITC in excess of available ledger balance

in both the statements.

 4.1 Validation Rules

 (A) ITC Reclaim Ledger

Reclaimed ITC in Table 4(D)(1) shall be:

≤ Closing balance of ITC Reclaim Ledger + ITC reversed in Table 4(B)(2) of current period

 (B) RCM Liability / ITC Statement

RCM ITC claimed in Table 4(A)(2) & 4(A)(3) shall be:

≤ RCM liability paid in Table 3.1(d) of current period + Closing balance of RCM Ledger

5.Impact of Negative Closing Balance – Mandatory Corrections

If a taxpayer has a negative closing balance in either ledger, GSTR-3B filing will be blocked until corrective action is taken.

 5.1 Negative Balance in ITC Reclaim Ledger

The taxpayer must:

• Mandatorily reverse excess reclaimed ITC in Table 4(B)(2) of the current GSTR-3B.

If no ITC is available in the current period, the reversal amount shall be added to the tax liability of the return.

 5.2 Negative Balance in RCM Liability / ITC Statement

The taxpayer must either:

1. Pay additional RCM liability equivalent to the negative balance in Table 3.1(d), OR
2. Reduce RCM ITC claimed in Table 4(A)(2) / 4(A)(3) to the extent of such negative balance.

6. Reference Advisories

• Electronic Credit Reversal & Re-claimed Statement – GSTN Advisory dated 17 September 2024

 RCM Liability / ITC Statement – GSTN Advisory dated August 2024

Read Also: GSTAT: Centre Notifies New Rules For GST Appellate Tribunal

2.FAQs – Electronic Credit Reversal & RCM Liability / ITC Statements:

Q1. How can I view my Electronic Credit Reversal & Re-claimed Statement?

Navigate to:
Dashboard → Services → Ledger → Electronic Credit Reversal and Re-claimed

 Q2. How can I view my RCM Liability / ITC Statement?

Navigate to:
Dashboard → Services → Ledger → RCM Liability / ITC Statement

 Q3. What change is proposed in GSTR-3B regarding ITC reclaim?

Taxpayers will not be allowed to file GSTR-3B if ITC reclaimed in Table 4(D)(1) exceeds the available balance in the ITC Reclaim Ledger plus ITC reversed in Table 4(B)(2) of the current period.

Q4. How to file GSTR-3B if ITC Reclaim Ledger shows negative balance?

A negative balance indicates excess ITC reclaimed earlier.

To file GSTR-3B, you must:

• Reverse such excess ITC in Table 4(B)(2) of the current return.

 Example:
Negative closing balance: ₹10,000
→ Reverse ₹10,000 in Table 4(B)(2).
If no ITC is available, the amount will be added to tax liability.

 Q5. How will RCM ITC validation work in GSTR-3B?

GSTR-3B filing will be blocked if:

RCM ITC claimed in Table 4(A)(2) / 4(A)(3) exceeds
RCM liability reported in Table 3.1(d) + closing balance of RCM ledger

 Q6. How to file GSTR-3B if RCM Ledger shows negative balance?

A negative balance means excess RCM ITC was claimed earlier.

To rectify:

• Option 1: Pay additional RCM liability in Table 3.1(d)
• Option 2: Reduce RCM ITC claimed in Table 4(A)(2) / 4(A)(3)

Example:
Negative balance: ₹5,000

• Pay ₹5,000 RCM liability OR
• Reduce RCM ITC claim by ₹5,000

Professional Insight

Taxpayers and professionals are strongly advised to:

• Regularly reconcile both ledgers with GSTR-3B,
• Clear negative balances proactively, and

Avoid last-minute filing disruptions once strict validations are enforced.

3.Advisory on Filing Opt-In Declaration for “Specified Premises” under GST (Electronic Filing Enabled on GST Portal):

1. Introduction

Pursuant to Notification No. 05/2025 – Central Tax (Rate), dated 16 January 2025, the Goods and Services Tax Network (GSTN) has enabled electronic filing of declarations for declaring hotel accommodation premises as “Specified Premises” on the GST Portal.

These declarations are applicable to existing registered taxpayers as well as persons applying for new GST registration who are engaged in the supply of hotel accommodation services and intend to opt for the specified premises category.

2. Eligible Persons for Filing the Declaration

The opt-in facility is available to the following categories of taxpayers:

Eligible Taxpayers

• Regular taxpayers (active or suspended) supplying hotel accommodation services who wish to declare their premises as specified premises
• Applicants for new GST registration intending to declare premises as specified premises from the effective date of registration

Ineligible Categories

The facility is not available to:

• Composition taxpayers
• TDS / TCS taxpayers
• SEZ units or SEZ developers
• Casual taxable persons
• Taxpayers with cancelled registrations

3. Types of Declarations Available on GST Portal

The following annexures have been enabled electronically:

(A) Annexure VII

Opt-In Declaration for Registered Person

• Applicable to existing registered taxpayers
• Used to declare premises as specified premises for a succeeding financial year

(B) Annexure VIII

Opt-In Declaration for Person Applying for Registration

• Applicable to new registration applicants
• Enables declaration of specified premises from the effective date of registration

Note:
Annexure IX (Opt-Out Declaration) will be enabled separately in due course.

Read Also: GSTN Postpones Non-Editable Table 3.2 in GSTR-3B After Taxpayers’ Grievances

4. Timeline for Filing Declarations

4.1 Existing Registered Taxpayers – Annexure VII

• Declaration can be filed for the subsequent financial year
• Filing window: 1st January to 31st March of the preceding financial year
• For FY 2026–27, Annexure VII can be filed between:
  01.01.2026 to 31.03.2026

4.2 New Registration Applicants – Annexure VIII

• Must be filed within 15 days from the date of generation of ARN of the registration application
• Filing is permitted even if GSTIN has not yet been allotted, provided the application is not rejected
• If the 15-day period lapses, filing can be done only during the Annexure VII window (1st January to 31st March)
• Filing of Annexure VIII is not permitted if the registration application is rejected, irrespective of the time elapsed 

5. Procedure to File Declaration on GST Portal

Step-by-step process:

1. Log in to the GST Portal
2. Navigate to:
   Services → Registration → Declaration for Specified Premises
3. Select the relevant option:
   • Opt-In Declaration for Specified Premises, or
   • Download Annexure Filed
4. Select eligible premises, fill in declaration details
5. Submit the declaration using EVC
6. On successful submission, an ARN will be generated

6. Important Compliance Points

• A maximum of 10 premises can be selected in a single declaration
• Separate PDFs with individual reference numbers are generated for each declared premise
• If certain premises are left out, additional Annexure VII filings may be made for the same financial year during the eligible window
• Suspended taxpayers are allowed to file declarations
• Cancelled registrations are barred from filing
• Once exercised, the option continues for subsequent financial years unless an opt-out declaration (Annexure IX) is filed within the prescribed time

7. Downloading Filed Declarations

Filed Annexures (VII / VIII) can be downloaded from:

Services → Registration → Declaration for Specified Premises → Download

Each declared premise will have a separate reference number.

8. Email and SMS Intimation

Upon successful filing:

• Email and SMS confirmations will be sent to all authorised signatories of the taxpayer.

9. Special Notes for Taxpayers

1. FY 2025–26 (First Year Transition):

For FY 2025–26, declarations were filed manually with jurisdictional authorities.
Since the online facility is now available, such taxpayers are required to re-file Annexure VII electronically for FY 2026–27 between 1 January 2026 and 31 March 2026.

1. First-time Declaration of Specified Premises: Taxpayers declaring specified premises for the first time must file Annexure VII for FY 2026–27 during the same window period.

10. Professional Takeaway

Taxpayers engaged in hotel accommodation services should:

• Review their eligibility and premises details promptly
• Ensure timely filing within the prescribed window
• Maintain proper documentation of declarations and acknowledgements

Plan in advance to avoid loss of benefit due to missed timelines.

4.NCCD to Continue as Part of Cigarette Tax Structure from 1 February 2026: Finance Ministry Clarification

The National Calamity Contingent Duty (NCCD) will continue to remain an integral component of the tax structure applicable to cigarettes even after the implementation of the revised indirect tax regime effective 1 February 2026, clarified sources in the Ministry of Finance.

According to official sources, the revised tax structure on cigarettes shall comprise the following three components:

40% Goods and Services Tax (GST) + New Central Excise Duty + Existing NCCD

This clarification dispels ambiguity regarding the status of NCCD following the withdrawal of the GST Compensation Cess on tobacco and allied ‘sin goods’.

Continuation of NCCD on Cigarettes

The NCCD, which is levied under the Finance Act, 2001, will continue to apply to cigarettes across various categories. The rate of NCCD differs depending on the length of the cigarette and whether it is filter or non-filter, thereby maintaining the existing classification-based structure.

The continuation of NCCD underscores the government’s intent to retain a multi-layered tax framework for tobacco products, considering both revenue and public health objectives.

Replacement of GST Compensation Cess

The government has notified 1 February 2026 as the effective date for a significant restructuring of the tax regime applicable to tobacco and pan masala products. From this date:

• Additional excise duty on tobacco products, and
• Health cess on pan masala,

will be levied in place of the existing GST compensation cess.

This change follows the discontinuation of the compensation cess regime originally introduced to compensate states for GST revenue shortfalls.

Levy of Health and National Security Cess

As per notifications issued by the Finance Ministry on 31 December 2025, the revised levy structure provides that:

• Health and National Security Cess on pan masala, and
• Central Excise Duty on tobacco products

shall be levied over and above the applicable GST rates.

Specifically:

• For cigarettes and other tobacco products, the levies shall apply in addition to the 40% GST rate, and
• For biris, the additional levies shall be imposed over and above the 18% GST rate, effective from 1 February 2026.

Introduction of MRP-Based Valuation for Certain Tobacco Products

A significant structural reform has also been introduced in the valuation mechanism for select tobacco products, namely:

• Chewing tobacco
• Filter khaini
• Jarda scented tobacco
• Gutkha

Under the new system, the GST taxable value shall be determined based on the Retail Sale Price (RSP/MRP) declared on the package, moving away from earlier valuation practices.

This measure is aimed at strengthening tax compliance and curbing under-reporting of value.

Revised Excise Duty Rates on Tobacco Products

The revised excise duty rates notified by the government include:

• Gutkha – 91%
• Chewing tobacco – 82%
• Jarda scented tobacco – 82%

These duties shall be levied in addition to GST, reinforcing the high-tax policy framework for tobacco and allied products.

Cigarette Tax Rates

0Post restructuring, cigarettes will attract tax (including excise duty and NCCD) in the range of:

₹2,050 to ₹8,500 per 1,000 sticks

The applicable rate will depend upon:

• Length of the cigarette, and
• Presence or absence of filter.

Read Also: GSTN Postpones Non-Editable Table 3.2 in GSTR-3B After Taxpayers’ Grievances

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