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

GST WEEKLY UPDATE : 48/2025-26 (01.03.2026)

1.Maharashtra Grants E-Way Bill Waiver for Motor Vehicles Moved Solely for Road Testing:

The Office of the Commissioner of State Tax, Maharashtra State, Mumbai has issued Notification No. SGST/e-way bill/02/2025-26 dated 20 February 2026, granting waiver from the requirement of generating e-way bills for transportation of motor vehicles moved solely for road-testing purposes. The relief has been accorded under sub-rule (5) of Rule 138A of the Maharashtra Goods and Services Tax Rules, 2017.

The permission was granted pursuant to a representation made by Tata Motors Ltd. (GSTIN: 27AALCT0864B1ZE), highlighting operational challenges in generating e-way bills for frequent vehicle movements undertaken exclusively for testing—movements which do not constitute “supply” under the GST framework.

Upon examination, the Commissioner of State Tax, Shri Asheesh Sharma, accepted the justification and extended conditional relief.

Key Conditions and Safeguards

1. Execution of Bond

The taxpayer must execute a bond covering the total value of vehicles intended for road testing in a calendar month with the Jurisdictional State Tax Officer, Pimpri-702, Pune.

2. Movement under Delivery Challan

Each vehicle must move under a pre-authenticated, serially numbered delivery challan signed by the authorized signatory.

3. Restricted Scope

The waiver applies strictly to:

• Transportation of motor vehicles
• Solely for road-testing purposes
• Not amounting to supply

4. Mandatory Details on Challan

The challan must include:

• GSTIN and jurisdiction details
• Reference to the Notification
• Vehicle identification particulars (engine/chassis/serial numbers)
• Dispatch date and expected return timeline

5. Use of Trade Plates

Vehicles must carry approved trade plates in accordance with the Central Motor Vehicles Rules, 1989.

6. Record Maintenance & Reporting

The taxpayer must:

• Maintain correlation records of dispatch and return
• Submit a monthly statement to the jurisdictional officer

7. Accountability & Revocation

Any breach of conditions may result in withdrawal of the facility. Full responsibility for goods moved without e-way bill remains with the taxpayer.

8. Validity

The notification is valid for FY 2025-26, i.e., up to 31 March 2026.

Read more:CBDT Extends Due Date for Filing Tax Audit Reports for AY 2025–26

 2.GST Portal Update: Flexible ITC Utilisation for IGST Payments: Enhancing Credit Efficiency from February 2026 Return Period:

The Central Goods and Services Tax Act, 2017 framework’s credit utilisation mechanism has been recently enhanced on the GST Portal with a taxpayer-friendly change in the Input Tax Credit (ITC) utilisation logic. Effective from the February 2026 return period, taxpayers can now leverage greater flexibility in offsetting their IGST liability using CGST and SGST credits in any order after fully utilising IGST credit.

This functional update, introduced in the GSTR-3B filing interface, aims to reduce cash outflows and streamline tax payments by enabling more effective use of accumulated ITC balances.

Key Changes & Benefits

▶ Improved Cash Flow

Taxpayers often face cash flow constraints when CGST or SGST credits remain idle despite IGST liability. The new functionality allows CGST/SGST ITC to be deployed more flexibly, reducing the need for cash disbursement and lowering blocked credit balances.

▶ Greater Utilisation Flexibility

Under the revised mechanism:

• IGST credit must be used first to discharge IGST liability (as per statutory hierarchy)
• Subsequently, taxpayers can choose to use CGST or SGST ITC in any order to settle any remaining IGST liability

This removes rigid sequence constraints that previously limited credit deployment efficiency, offering taxpayers better control over their tax payments.

▶ Simplified Compliance

The automated flexibility reduces manual planning and adjustments while filing GSTR-3B, simplifying the overall compliance process.

How It Works — Step-by-Step

1. Apply IGST ITC First:
   The portal will automatically apply available IGST credit against the IGST tax dues.
2. Utilise CGST/SGST ITC in Any Order:
   After exhausting IGST credit, taxpayers can elect to use CGST or SGST credits in either order to settle the remaining IGST liability.

The interface now clearly reflects these options during the payment cycle of the GSTR-3B return.

Important Notes for Taxpayers

• Ensure complete utilisation of IGST credit first, before drawing on CGST/SGST ITC for IGST dues.
• The eligibility conditions for ITC (as per Section 16 of the CGST Act and associated rules) remain unchanged—only the utilisation sequence is affected.

Always verify the ITC utilisation summary displayed on the portal before filing your GSTR-3B, to ensure accurate settlement of liabilities.

Read more:No refund on ITR AY 2025-26 until Income Tax Department completes investigation on you

 3.AAR & Important Judgements:

(i) Hon’ble Supreme Court Judgement Regarding Rooh Afza Classifiable as “Fruit Drink” – Not Residuary Item under UPVAT:

(Applicant – Hamdard (Wakf) Laboratories)

The Supreme Court reversed the High Court’s judgment and laid down important principles on fiscal classification:

(A) Dominant Character & Functional Test

The Court observed:

• Rooh Afza derives its beverage identity from fruit-based ingredients.
• It is intended to be diluted and consumed as a drink.
• The presence of fruit content, though 10%, contributes to its essential character.

The product, therefore, qualifies as a fruit drink/processed fruit product.

(B) Fiscal Classification vs. Regulatory Classification

A key legal principle reaffirmed:

Regulatory definitions under food safety laws cannot control fiscal interpretation unless expressly incorporated into the taxing statute.

The Court clarified:

• The UPVAT Act did not adopt the 25% threshold from food safety regulations.
• Tax entries must be interpreted based on their own language.
• External regulatory standards cannot be imported into tax statutes unless specifically referenced.

This distinction between regulatory compliance and tax classification was central to the ruling.

(C) Residuary Entry – Last Resort

The Court reiterated settled jurisprudence that:

• Residuary entries apply only when goods cannot reasonably be classified under any specific entry.
• If two views are possible, classification under the specific entry must prevail over residuary.

Since “fruit drink/processed fruit product” was a specific entry covering the product’s character, the residuary classification was unsustainable.

Final Ruling

The Supreme Court:

• Allowed the batch of appeals filed by Hamdard.
• Set aside the 2018 Allahabad High Court judgments.
• Held that Rooh Afza is classifiable under Entry 103 of Schedule II (Part A) of the UPVAT Act.
• Applicable VAT rate: 4% (concessional rate) instead of 12.5%.

Relief granted for assessment years 2008–2012.

(ii) Hon’ble Madras Highcourt Decision Regarding Clubbing of SCNs across multiple financial years — Whether impermissible in view of the expression “the financial year” — Limitation — Remand subject to pending intra

(Applicant – Poppys Hotel Pvt Ltd)

A batch of writ petitions challenged the validity of consolidated show cause notices (SCNs) issued under Sections 73/74 of the CGST Act covering multiple financial years. The Assessees contended that the use of the expression “the financial year” in Sections 73(10) and 74(10) mandates year-specific adjudication, thereby rendering “clubbed” SCNs legally unsustainable. Reliance was placed on principles of statutory interpretation attaching restrictive significance to the definite article “the,” and on comparative limitation constructs under the erstwhile Central Excise regime.

The Revenue defended the notices by emphasizing that limitation under the CGST Act is computed financial year-wise, and that such computation does not necessarily require segregation of proceedings into separate SCNs where issuance is otherwise within statutory timelines.

The High Court, after extensive hearing, declined to render a broad interpretative ruling on the permissibility of clubbing. The Bench examined the practical computation of limitation vis-à-vis the date of issuance of SCNs and observed that the controversy involved factual and jurisdictional aspects warranting adjudicatory examination. Treating the larger interpretative issue as academic in the present factual setting, the Court remanded the matters to the adjudicating authority with liberty to the Assessees to raise all contentions, including limitation and jurisdiction.

The remand was expressly made subject to the outcome of a pending writ appeal before the Division Bench, in which a stay was already operating. Certain petitions were de-tagged owing to distinct factual matrices.

(iii) Hon’ble Telangana Highcourt Decision Regarding Jurisdiction of Proper Officer — SCN issued prior to Circular — Whether adjudication and penalty sustainable — Fraudulent ITC and fake invoicing — Effect of Section 160

(Applicant – Alokadci Holdings Pvt. Ltd.)

The petitioner challenged an Order-in-Original passed by the Joint Commissioner imposing penalty under Sections 122(1)(ii) and 122(1)(vii) of the CGST Act for fraudulent availment of input tax credit (ITC) and issuance of invoices without actual supply. The principal contention was that the officer lacked jurisdiction, as the show cause notice (SCN) had been issued prior to the Circular dated 27.10.2025 conferring adjudicatory authority.

The High Court rejected the challenge, holding that jurisdiction must be examined as on the date of adjudication. Since the Circular conferring jurisdiction was in force when the Order-in-Original was passed, the Joint Commissioner was competent to adjudicate and impose penalty. Circular No. 254/11/2025-GST did not dilute such authority.

Invoking Section 160, the Court held that proceedings are not invalid merely on account of technical or procedural defects where they substantially conform to statutory requirements. The petitioner had neither responded to the SCN nor raised jurisdictional objections during adjudication.

Relying on precedent affirming similar jurisdiction, the Court found no grounds for interference under Article 226 and dismissed the writ petition, granting liberty to pursue the statutory appellate remedy with exclusion of the writ period for limitation purposes.

(iv) Hon’ble Gujarat Highcourt Decision Regarding Input Tax Credit on leasehold rights — Whether hit by Section 17(5)(d) (construction of immovable property) — Invocation of Section 74 — Blocking of ITC — Validity of SCN

(Applicant – Niket Bipinbhai Patel)

The petitioner challenged proceedings initiated under Section 74 of the CGST Act alleging wrongful availment of Input Tax Credit (ITC) on GIDC charges paid towards transfer of leasehold rights. The Department contended that such credit was blocked under Section 17(5)(d), treating the transaction as relating to construction of immovable property. ITC amounting to ₹98,11,678 was blocked and recovery proceedings were initiated alleging suppression and fraud.

The High Court examined the scope of Section 17(5)(d) and held that the provision applies specifically to credit on goods or services used for construction of immovable property on own account. Transfer of leasehold rights, by its nature, does not constitute construction activity. The Court emphasized that blocked credit provisions must be interpreted strictly and cannot be expanded beyond the clear statutory language.

On invocation of Section 74, the Court found no material demonstrating fraud, wilful misstatement, or suppression of facts. The preconditions for invoking the extended limitation and penal consequences under Section 74 were absent. The show cause notice was held to suffer from non-application of mind and was quashed.

Consequently, the Court directed unblocking of the ITC.

Is mandatorily required to reverse Input Tax Credit (ITC) upon receipt of post-sale discount credit notes from the seller Shree Ambica Auto Sales and Service & Anr. v. Union of India & Anr.(R/Special Civil Application No. 1277 of 2024, decided on 08 January 2026, Gujarat High Court)

Issue:
Whether a buyer is mandatorily required to reverse Input Tax Credit (ITC) upon receipt of post-sale discount credit notes from the seller, and whether rectification of GSTR-1/GSTR-3B can be permitted beyond statutory timelines in a revenue-neutral mismatch arising from portal reporting errors.

Held:
The Gujarat High Court held:

• There is no statutory provision under the CGST Act mandating ITC reversal by the buyer solely on account of seller-issued credit notes.
• Under Section 15(3)(b), the risk of discount disallowance rests with the supplier if ITC is not reversed by the recipient.
• The Petitioners had already discharged output tax on debit notes, effectively neutralizing ITC impact.
• The situation was revenue neutral, as tax paid exceeded the proposed reversal.
• Sections 37(3), 38, 39(9) and 39(10) must receive purposive interpretation to permit bona fide rectification beyond portal timelines where no revenue loss occurs.

The Court quashed the impugned order dated 26 December 2023 and directed reopening of the GST portal within four weeks to enable rectification of GSTR-1/GSTR-3B, or alternatively, acceptance of manual correction.

Read more:Union Budget 2026: Key Expectations, Sector Signals, and the Road to Viksit Bharat

 

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