In this News Letter 2nd Edition of February 2026 you’ll find:
1. RATIO OF LATEST JUDGEMENTS ON GST
2. GST UPDATES
3. DUE DATES – GST COMPLIANCES IN MARCH 2026
RATIO OF LATEST JUDGEMENTS ON GST
HAMDARD (WAKF) LABORATORIES VS. COMMISSIONER, U.P. COMMERCIAL TAX CIVIL APPEAL NO (S). 2557-2578 of 2026 Arising out of SLP (C) Nos. 6074 – 6095 of 2019 (Supreme Court)
The present batch of appeals arises out of the common judgment and order dated 02.07.2018 passed by the Allahabad High Court in Sales / Trade Tax Revision of 2012, whereby the High Court dismissed the revisions preferred by the appellant and affirmed the order of the Commercial Tax Tribunal, Ghaziabad holding that the appellant’s product “Sharbat Rooh Afza” was liable to Sales Tax /Value Added Tax at the rate of 12.5% under the residuary entry contained in Schedule V of the Uttar Pradesh Value Added Tax Act, 2008.
The appellant manufactures “Sharbat Rooh Afza,” a non-alcoholic concentrated beverage. Its composition includes 80% invert sugar syrup, 10% fruit juice (8% pineapple, 2% orange), and various herbal distillates and extracts. For the assessment period of 01.01.2008 to 31.03.2012, the appellant paid Value Added Tax (VAT) at 4%, classifying the product as a “Fruit Drink” under Entry 103, Schedule II, Part A of the Uttar Pradesh Value Added Tax (UPVAT) Act, 2008. The Commercial Tax Department argued the product was an unclassified item (a sugar-based concentrate/sharbat) and should be taxed at 12.5% under the residuary entry (Schedule V), to which the Hon’ble Allahabad High Court agreed with.
The Core issues presented before the Hon’ble Supreme Court of India for adjudication are as follows: (i) Whether “Sharbat Rooh Afza” qualifies as a “fruit drink” under the inclusive Entry 103 of the UPVAT Act or falls under the residuary entry; (ii) Whether regulatory classifications under food safety laws (like the FPO) are determinative for fiscal/taxation classification; & (iii) Who bears the burden of proof when the Revenue seeks to move a product from a specific entry to a residuary one.
The Hon’ble Supreme Court observed that in the absence of a statutory definition, a product must be understood as it is in the commercial world. The court held that a reasonable consumer perceives Rooh Afza as a fruit-based beverage, regardless of technical fat or sugar content. Further, the sugar syrup is 80% of the volume, it acts merely as a carrier/preservative. The distinctive identity, aroma, and flavour (the “essential character”) of the drink are derived from the fruit juices and herbal extracts. Entry 103 uses the word “including,” indicating legislative intent to broaden the scope. Since the entry does not prescribe a minimum fruit percentage, the court cannot read a “25% threshold” into the tax statute. The Court further said that the onus is “squarely upon the Revenue” to prove a product fall into a residuary category. The Department failed to provide market surveys or trade inquiries to disprove the “fruit drink” classification. Recourse to a residuary entry is a last resort (“orphanage of the residuary clause”). If a product bears a reasonable claim to a specific entry, it must be classified there. Thus, the Hon’ble Supreme Court Held that “Sharbat Rooh Afza” is classifiable under Entry 103 as a fruit drink/processed fruit product. The product is eligible to VAT at the concessional rate of 4% rather than 12.5%. The Hon’ble Court further directed the respondent authorities to grant consequential relief, including the refund or adjustment of the excess tax paid by the appellant.
VIKRAM BHUWALKA VS ASSISTANT COMMISSIONER OF STATE TAX WPA 12494 OF 2025, (Calcutta High Court)
The Petitioner, herein was held liable by the Assistant Commissioner of State Tax for tax on two grounds:
(i) Input Tax Credit (ITC) uploaded by suppliers whose registration was cancelled retrospectively; (ii) ITC found reversible in respect of credit notes received. The petitioner claimed to have submitted all relevant documents, including transporter’s records, e-way bills, and payment details through banking channels, but these were allegedly not considered by the Proper Officer.
The Hon’ble Calcutta High Court herein, rejected the Revenue’s objection regarding the availability of an appellate remedy under Section 107, the Court reiterated that writ jurisdiction remains fully maintainable when the decision-making process is tainted by procedural unfairness or denial of reasonable opportunity. The Court emphasized that the assessee had produced extensive documentary evidence such as invoices, transporter records, vehicle details, delivery acknowledgements, e-way bills, suppliers’ GSTR-3B filings, and banking-channel payments yet the adjudicating authority provided no reasoned basis for rejecting these materials.
The Hon’ble Calcutta High Court held that an adjudication order issued under Section 73 of the WBGST/CGST Act was vitiated for violating natural justice, as the authority failed to properly consider the Assessee’s reply to the show-cause notice and relied on undisclosed third-party statements. It was further held that adverse reliance on statements or declarations of vehicle owners, whose GST registrations were cancelled retrospectively, without furnishing such material to the assessee or permitting cross-examination, amounted to a clear and fatal breach of natural justice.Thus, the Hon’ble High Court set aside the impugned order.
BHARATHIDASAN UNIVERSITY VS THE JOINT COMMISSIONER OF GST (ST-INTELLIGENCE) & ANR. W.P.(MD) NOS. 27453, 27456 TO 27458 OF 2025, (Madras High Court- Madurai Bench)
The Division Bench of the Madras High Court (Madurai Bench) held that affiliation fees collected by universities from colleges are subject to GST. Granting affiliation constitutes a taxable supply of service and is not covered under any specific exemption.
The Court clarified that services relating to granting affiliation or conducting inspection for affiliation are distinct from services of admission of students or conduct of examinations. Affiliation is a statutory pre-requisite that enables a college to admit students but is not part of the admission or examination process itself.
While universities qualify as “educational institutions,” the exemption under Notification No. 12/2017-CTR applies only to services relating to admission to, or conduct of examination by, such institutions. It does not extend to all services rendered by a university, including affiliation-related services.
The Court rejected the argument that affiliation services fall within the broader meaning of services connected with admission or examination. It emphasized that extending the exemption beyond its explicit scope is impermissible under GST law.
Resolving conflicting judicial views from earlier cases, the Division Bench answered the reference against the assessee (Bharathidasan University), affirming GST applicability on affiliation charges. The matter was remitted to the Single Judge for consideration on any remaining grounds.
HUAWEI TECHNOLOGIES INDIA PRIVATE LIMITED VS. STATE OF KARNATAKA & ORS. WRIT PETITION NO. 2848 OF 2024 (T-RES) (Karnataka High Court)
In present facts of the case, the petitioner is an Indian company, part of Huawei Group (headquartered in China). The petitioner company hired foreign nationals under direct employment contracts, paying their salaries in Indian bank accounts, deducting income tax (TDS), and providing benefits similar to Indian employees. The tax authorities issued a show cause notice (SCN) demanding Integrated Goods and Services Tax (IGST) of approximately ₹85.51 crore (plus interest and penalty) on these salaries for the period April 2018 to March 2023. The authorities contended this remuneration was consideration for the “import of manpower recruitment and supply service” from the foreign nationals who were allegedly “non-resident taxable persons”
The Petitioner asserted a direct employer-employee relationship existed (evidenced by TDS and payroll), thus falling under the Entry 1, Schedule III exclusion from GST. Argued the foreign nationals were not “non-resident taxable persons,” and per a CBIC circular, the taxable value should be ‘Nil’ as the company was eligible for full ITC. Whereas, the Respondent argued that arrangement constituted an import of manpower services and that the foreign nationals were non-resident taxable person.
The Hon’ble High Court emphasized that a valid employer–employee relationship existed between the assessee and the expatriates. Factors considered included:
- Employment contracts specifying salary, bonus, HRA, PF, tenure, and working hours
- Income tax deductions under the Income Tax Act, 1961
- Filing of ITRs in India
- Equal treatment with Indian employees
The Hon’ble Court clarified that this was not a case of secondment, but direct employment. Therefore, the arrangement could not be characterized as “manpower supply service.”
The Court rejected Revenue’s argument that expatriates qualified as “non-resident taxable persons” under Section 2(77) of the CGST Act. It clarified that:
- A non-resident taxable person must make occasional supplies of goods or services.
- Services by an employee to employer are not treated as supply.
- The location of supplier was in India, so the transaction did not qualify as “import” under Section 2(11) of the IGST Act.
Therefore, statutory conditions for taxability were not met.
The Court noted that even if the arrangement were hypothetically treated as a supply, Circular No. 210/4/2024-GST provides that where no invoice is raised by the domestic entity for services received from
a foreign affiliate, the open market value is deemed to be ‘Nil.’ Since no invoice was raised in this case, the circular effectively eliminates any potential GST liability.
The Karnataka High Court held that salaries paid to foreign nationals employed by the assessee fall squarely under Entry 1 of Schedule III of the CGST Act, which excludes services by an employee to the employer in the course of employment from the scope of “supply.” Accordingly, no GST can be levied on such salary payments.
JSW STEEL LIMITED Vs. UNION OF INDIA & ORS. WRIT PETITION NO. 12 OF 2026, (Bombay High Court- Goa Bench)
The Goa Bench of Bombay High Court granted relief to JSW Steel after the Assessee was compelled to pay IGST interest due to an ICEGATE technical glitch, holding that such automated computation cannot override a categorical Order-in-Original that refrained from imposing interest.
Relying on its prior ruling in Larsen and Toubro Ltd and the Supreme Court’s decision in Shah Nanji Nagsi Exports, the Hon’ble High Court reiterated that substantive taxpayer rights cannot be defeated by system errors, noting with concern that authorities failed to rectify ICEGATE issues despite earlier judicial directions and expired deadlines.
The Assessee’s challenge to reassessment of Bills of Entry and its request for rectification under Section 154 were supported by reliance on the Order-in-Original, which had applied the principle from Mahindra and Mahindra (affirmed by the Supreme Court of India) that interest or penalties on duties not intrinsically linked to basic customs duty require explicit statutory authority.
The Revenue acknowledged the glitch and admitted the absence of any mechanism to manually correct it, suggesting payment of interest followed by refund, and also pointed to pending departmental appeals; the Court rejected this stance, holding that pendency of appeal cannot justify non-implementation of the binding Order-in-Original.
To provide a practical remedy, the Court directed that IGST be paid via demand draft and be treated as if paid through ICEGATE, ensuring that all consequential legal benefits accrue to the Assessee, while instructing authorities to extend such benefits promptly upon receipt of payment.
NIKET BIPINBHAI PATEL VS ASSISTANT COMMISSIONER (A.E.) CGST R/SPECIAL CIVIL APPLICATION NO. 18068 OF 2025, (Gujarat High Court)
In present facts of the case, the Petitioner, an NRI, acquired leasehold rights for a GIDC plot and engaged in sub-plotting and transferring those rights to various purchasers. The Petitioner paid various charges (sub-divisional, transfer fees, etc.) to GIDC, which included GST. He availed Input Tax Credit (ITC) on these charges, as they were linked to his business. The GST department issued a show-cause notice (SCN) dated 28.10.2025 under Section 74(1), alleging that the Petitioner wrongly availed and utilised ITC of ₹98,11,678/- in violation of Section 17(5)(d) (blocked credit for construction). The department blocked the aforementioned amount in the Petitioner’s electronic credit ledger on 22.09.2025.
The Petitioner argued that Section 17(5)(d) does not apply because no construction activity was involved; the business was solely transferring leasehold rights. Further contended that the notice under Section 74 was baseless as there was no fraud, wilful mis-statement, or suppression of facts. Also that although some
ITC was inadvertently used in July 2022, it was reversed via Form DRC-03 in April 2023, and all output liability was paid in cash.
Whereas, the Department argued that Petitioner violated Section 17(5)(d) and that the SCN was necessary to adjudicate the correctness of the ITC claimed.
The Gujarat High Court held that input tax credit (ITC) claimed on invoices issued by the Gujarat Industrial Development Corporation for charges incurred in relation to transferring leasehold rights in GIDC sub-plots does not fall within the restriction under Section 17(5)(d), since the provision is intended to block credit only for construction-related expenditure. The Hon’ble Court emphasized that the Revenue failed to demonstrate that the assessee engaged in any construction activity; the business consisted solely of acquiring GIDC leasehold rights, subdividing plots, and transferring leasehold rights, which does not trigger the bar under Section 17(5)(d), making the alleged ineligibility of ITC unsustainable.
The show cause notice under Section 74—based on the claim that ₹98 lakh of ITC was wrongly availed and used—was quashed, as the electronic credit ledger had been blocked without establishing violation of Section 17(5)(d), and the ITC was in fact directly linked to the taxable business activity of transferring leasehold rights.
The assessee’s arguments were accepted that the ITC had never been utilized for output tax payment, remained unutilized in the electronic credit ledger, and even if any portion were irregularly availed, the situation would be revenue-neutral because future outward supplies were not taxable.
The Court found no fraud, wilful misstatement, or suppression to justify Section 74 proceedings, especially since the assessee had already paid substantial GST liabilities in cash and voluntarily reversed inadvertently availed ITC through DRC-03; accordingly, it directed the Revenue to unblock the ₹98 lakh ITC balance.
GST UPDATES:
- Effective February 21, 2026, GSTN introduced an online facility for taxpayers to withdraw from the Simplified Registration Scheme (for small suppliers) under Rule 14A by filing Form GST REG-32 on the portal. This enables taxpayers to switch out of the scheme, requiring mandatory Aadhaar/biometric authentication for the primary signatory and promoters.
- GSTN has introduced a dedicated tab in the Outward Invoice Management System (IMS) to specifically display rejected Credit Notes, Debit Notes and related amendments. This feature enables taxpayers to easily identify, track and add back the tax liability for rejected documents in their GSTR-3B, reducing the need for manual reconciliation.
DUE DATES – GST COMPLIANCES IN MARCH 2026 | |||
Monthly | Quarterly | Other Due Dates | |
GSTR-3B (Feb, 2026) Mar 20th, 2026
| GSTR-3B (Jan-Mar, 2026) Apr 22nd, 24th, 2026
| GSTR-5 (Feb, 2026) Mar 13th, 2026
| GSTR-5A (Feb, 2026) Mar 20th, 2026
|
GSTR-1 (Feb, 2026) Mar 11th, 2026
| GSTR-1 (Jan-Mar, 2026) Apr 13th, 2026
| GSTR-6 (Feb, 2026) Mar 13th, 2026
| GSTR-7 (Feb, 2026) Mar 10th, 2026
|
IFF (Optional) (Feb,2026) Mar 13th, 2026
| CMP-08 (Jan-Mar, 2026) Apr 18th, 2026
| GSTR-8 (Feb, 2026) Mar 10th, 2026
| RFD-10 2 years from the last day of the quarter in which supply was received |
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