GST Litigation Update: Key Judicial and Advance Rulings

 

High Court: Interest Refund Allowed on Subsequent Realisation of Export Proceeds

In Ernst and Young LLP v. UOI (2026-VIL-1215-P&H), the Punjab & Haryana High Court held that interest paid under Rule 96A is refundable when export proceeds are subsequently realized.

The taxpayer had exported services under a Letter of Undertaking (LUT) but failed to realize export proceeds within the prescribed one-year period. Consequently, it paid IGST along with interest under Rule 96A(1)(b). After the export proceeds were eventually realized, the department refunded the tax but denied the refund of interest relying on Para 4.6 of Circular No. 197/09/2023-GST.

The Court observed that Section 54(1) permits refund of tax as well as interest paid on such tax. Since Rule 96A does not prohibit refund of interest on subsequent realization of proceeds, the circular could not impose a restriction beyond the Act and Rules. The Court reiterated that interest is compensatory in nature and follows the principal amount. Accordingly, the restriction contained in Para 4.6 of the circular was struck down to that extent.

While the ruling correctly enforces the principle that a circular cannot override statutory provisions, it also raises an unresolved issue: Rule 96A itself does not expressly provide for refund of tax after delayed realization, unlike Rule 96B applicable to goods exports. Nevertheless, the judgment provides significant relief to service exporters facing delayed foreign exchange realization.

CESTAT Chennai Upholds Service Tax on Employee Secondment Arrangements

 The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, in Alstom T&D India Limited v. Commissioner [2026 (10) TMI 2027 - CESTAT Chennai], has reaffirmed the taxability of cross-border employee secondment arrangements under the service tax regime, relying extensively on the Supreme Court's landmark ruling in Northern Operating Systems Pvt. Ltd. (NOS). The decision provides important insights into determining whether a secondment arrangement constitutes an employer-employee relationship or a supply of manpower service by a foreign entity.

INDIA TAX DUE DATE NOVEMBER 2026

 

S No	Due Date	Related to	Compliance to be made
1	11.11.2026	GSTR – 1	Filing of GSTR 1 for the month of October 2026
2	13.11.2026	GST – ISD	Filing for the month of October 2026
3	20.11.2026	GST	-Payment of GST for the month of October, 2026 -Filing of GSTR 3B for the month of October, 2026

Executive Summary of Key GST Changes (Effective Nov 2026 onwards)

Area	Key Change	Effective Date / Impact
GST Rates - Goods	Plastic scrap, e-waste, tyre scrap and used cooking oil procured from unregistered suppliers taxable under RCM; 2% TDS on B2B supplies. GST on re-treaded tractor tyres reduced to 5%.	Oct 2026
GST Rates - Services	EV passenger transport/rental eligible for 5% GST with restricted ITC. Delivery services via ECOs made taxable in hands of ECOs. ITC relaxation for restaurants, catering, hotels and fitness services used in same line of business.	Oct 2026

When a Subsidiary Investment Becomes a Business Loss

 

Key Takeaways

• Shares in a subsidiary are not automatically capital assets merely because they are shares.
• Three High Courts have recognized that losses arising from investments in subsidiaries can qualify as business losses when the investment is driven by commercial expediency and business objectives

Background

• The 57th GST Council Meeting was held on 8 October 2026 and focused mainly on process reforms relating to registration, assessments, appeals, refunds and enforcement.
• Eight GST Circulars and one Notification were issued on 26 October 2026 to implement part of the Council's recommendations.
• Most major legislative and rate-related changes are still pending and are expected to be effective from 1 April 2027 after necessary amendments.

Big Brother is Counting: How the Taxman Knows About Your Stock Sales and FD Interest

 Let’s start with a small story in this regard.

Mr. A, a mid-level software engineer, felt incredibly confident about his tax return last year. He had uploaded his Form 16, claimed his standard deduction, and proudly hit the submit button on the income tax portal. What he decided not to include was the ₹25,000 interest he earned from a couple of old Fixed Deposits (FDs) and a quick ₹50,000 profit he made selling shares on a popular trading app to fund a quick vacation. In his mind, these were minor, fragmented amounts. Who would possibly notice a few casual stock trades or interest accumulating in a secondary bank account?

CBIC Issues Circulars Pursuant to the Recommendations of the 57th GST Council Meeting

 The Central Board of Indirect Taxes and Customs (CBIC) has issued a series of circulars implementing the recommendations of the 57th GST Council Meeting. These clarifications provide greater certainty on export proceeds, refund eligibility, input tax credit (ITC) treatment, and adjudication-related matters, while addressing several long-standing areas of litigation.

GAAR Not Applicable to Genuine Capital Market Transactions: Telangana High Court

In a significant ruling, the Telangana High Court held that General Anti-Avoidance Rules (GAAR) cannot be invoked merely because a transaction results in a tax benefit. The case involved a taxpayer who invested surplus funds from a business slump sale into listed shares, received bonus shares, and subsequently incurred a short-term capital loss due to the statutory tax treatment of bonus shares and the FIFO method for identifying shares sold. The taxpayer legally set off this loss against long-term capital gains.

The Revenue attempted to invoke GAAR, alleging that the transactions were structured to obtain a tax advantage. However, the Court observed that the shares were purchased and sold through recognized stock exchanges at market prices, without any pre-arranged counterparties or collusive arrangements. The loss arose from the operation of specific provisions of the Income-tax Act and not from any artificial or abusive tax scheme.

The Court emphasized that legitimate tax planning and utilization of statutory computation mechanisms cannot be treated as tax avoidance. It further clarified that the burden of proving an impermissible