These GSTN advisories introduce revised information requirements and more automated portal processes. Businesses applying for registration, updating their particulars or closing a GST registration should check the relevant documents, eligibility conditions and verification deadlines. Accurate information and timely return filing remain essential to successful processing. This article explains all six compliance advisories, excluding the GST revenue collection report. GSTN advisories dated 1 November 2026.

GST Registration Changes in FORM GST REG-01

Who should pay attention: Businesses applying for a new GST registration through FORM GST REG-01.

The revised form introduces additional fields and clearer documentary requirements. Applicants should prepare the following before starting:

• Business constitution: One Person Company is now a separate category. Upload the relevant incorporation certificate, partnership deed or other prescribed evidence for the selected constitution.
• Special categories: SEZ units and developers must provide their SEZ Entity ID. E-commerce operators liable under Section 9(5) have a separate section covering physical presence and, where applicable, an authorised representative.
• Existing registrations: The revised disclosures expressly cover GSTIN, Professional Tax Registration Number and Professional Tax Enrolment Registration Number, along with other applicable particulars.
• Business premises: Select the correct category for owned, rented or leased, consent-based, co-working or SEZ premises, or premises in a deceased ancestor’s name, and provide the documents specified for that category.
• Business activities: The expanded list captures activities such as property rentals, vehicle/vessel/aircraft hiring, co-working spaces and health and fitness clubs, as well as factory registration and Authorised Economic Operator details where applicable.
• Bank accounts and identification numbers: Up to 10 bank accounts can be reported. Furnish available details with the application; if unavailable, provide them within 30 days of issuance of the registration certificate in REG-06. LLP applicants must furnish designated partners’ DINs. Applicable CIN, FCRN, LLPIN and FLLPIN details are subject to online validation.

An Application Reference Number, or ARN, will be generated only after the required information passes validation.

What to do: Update the registration checklist used by your accounts team or adviser. A mismatch between the selected premises category and its documents can hold up the process. GSTN advisory on FORM GST REG-01.

Rule 14B Simplified GST Registration for E-commerce Sellers

Who should pay attention: Suppliers of goods selling through e-commerce operators that collect tax at source under Section 52.

The new Rule 14B simplified registration facility allows eligible sellers to obtain registration in a State or Union Territory where they have no physical place of business, using an approved e-commerce operator’s warehouse as their principal or additional place of business.

For example, a seller with an eligible active registration in Gujarat may be able to use an approved operator’s warehouse address to register in another State, subject to the scheme’s conditions.

Rule 14B Eligibility and the Monthly Tax Liability Limit

The applicant must have neither physical presence nor an active regular registration in the destination State/UT. Only one registration under Rule 14B is permitted per PAN in that State/UT, in the regular taxpayer category. Composition taxpayers, ISDs, SEZ units/developers and casual taxpayers are excluded from this route, as are jurisdictions in the “Other Territory” category.

The seller must already have a regular, active registration under the same PAN in another State/UT, called the Home State GSTIN. That GSTIN cannot be under Rule 14A or Rule 9A or carry State Code 97; the advisory permits a Rule 14A taxpayer to withdraw from that scheme before applying under Rule 14B. No Section 29 proceedings should have been initiated, and no cancellation application should have been filed, for the home registration.

Two limits are particularly important:

• Total output tax liability on supplies to registered persons must not exceed ₹2.5 lakh per month, combining CGST, SGST/UTGST and IGST. This is a tax-liability limit, not a sales-turnover limit.
• The Rule 14B registration must be used exclusively for supplies through e-commerce operators.

E-commerce Operator Consent and Registration Timelines

Select the Rule 14B option in REG-01, enter the Home State GSTIN and request access to the operator’s warehouse addresses. The operator’s GSTIN must be regular, active and in the destination State, with an active TCS registration under the same PAN in that State/UT.

After address selection and system validations, the operator must provide the prescribed consent within seven working days. Without the required consent for the principal place of business, no ARN is generated.

Previously completed home-registration biometric Aadhaar authentication and document verification may be recognised. Where verification is required, it must be completed within the prescribed 15-day period from submission of Part B of REG-01 for ARN generation.

Where a field visit is required, the advisory provides for deemed approval on successful completion of the visit or expiry of 30 days from ARN generation, whichever is earlier. A negative home-registration field-visit report can cause pending Rule 14B applications across States/UTs to be automatically rejected.

What to do: Check eligibility and coordinate warehouse access, consent and verification with the operator before planning expansion around this facility. GSTN advisory on Rule 14B.

GST Registration Cancellation under REG-16

Who should pay attention: Taxpayers applying to cancel their registration through FORM GST REG-16.

The revised process allows electronic approval without officer intervention where the prescribed conditions are met.

First, all applicable returns due on or before the requested effective cancellation date must be filed before the cancellation application can be submitted. If GSTR-1 or the Invoice Furnishing Facility has been used for a tax period, the corresponding GSTR-3B must also be filed.

Where returns relating to the period up to cancellation are still to become due, the application may move to “Pending for Returns Filing”. File those returns within their respective due dates; failure sends the application to the jurisdictional officer.

Once the required returns are filed on time, the approval route depends on the taxpayer category:

For the last category, the advisory specifies a three-day GSTR-10 window from the due date of the returns identified in the pending-returns stage. If that stage does not apply, the period runs from submission of the cancellation application. Missing this window routes the application to the officer; it does not itself mean automatic rejection.

What to do: Reconcile returns before applying and monitor the application status closely. The three-day window is specific to this electronic approval process; it should not be treated as a blanket replacement for every taxpayer’s final-return deadline. GSTN advisory on REG-16 cancellation.

GST Registration Amendments and OTP Verification under REG-14

Who should pay attention: Registered businesses changing their registration particulars through FORM GST REG-14.

A change to the principal place of business will continue to be examined by the proper officer. For other particulars, including the legal name, relevant partner/director details and additional places of business, the revised process provides for amendment on submission and successful online validation.

The mobile number and email address of the Primary Authorised Signatory and one selected promoter, partner, director, Karta, member or trustee must undergo OTP verification. Applicable PAN, DIN and CIN details are also validated online.

The prescribed OTP verification must be completed within three days of application submission. Otherwise, no ARN will be generated. The portal provides the route Services → Registration → OTP verification of GSTIN.

What to do: Confirm access to the relevant mobile numbers and email accounts before submitting an amendment. The faster route depends on completing validation, not simply uploading REG-14. GSTN advisory on registration amendments.

GST Composition Scheme Changes under Section 10(2A)

Who should pay attention: Businesses registered under, or opting for, the composition scheme.

The portal now separately identifies a “Person eligible for composition levy under Section 10(2A)”. Taxpayers can select either the existing Option A categories or the new Section 10(2A) Option B category. The two options cannot be selected together.

Multiple selections remain possible within Option A, which covers the specified existing categories of manufacturers, restaurant-service suppliers and other eligible Section 10(1) suppliers.

Composition taxpayers can now update their category through REG-14. The advisory also requires the category to be correctly updated across all GSTINs linked to the same PAN. The changes apply to the relevant REG-01, CMP-02, CMP-04 and REG-14 applications.

What to do: Review the selected category across your registrations and make corrections where needed. A new portal selection does not, by itself, establish eligibility under the relevant section. GSTN advisory on composition levy functionality.

GST TDS Registration for Scrap and Other Notified Goods

Who should pay attention: Businesses receiving supplies of the specified goods that fall within the notified GST TDS requirements.

In addition to metal scrap covered by Chapters 72–81, the advisory identifies four further categories notified under the TDS provisions:

For the relevant TDS registration application in FORM GST REG-07, select “Others” under “Constitution of Business” in Part B, Table 2. Enter the applicable dealer category in the text box that appears, complete the remaining details and submit.

What to do: Affected businesses should review their purchases and TDS registration position under Section 51 and the applicable notification. The REG-07 instructions are a portal-filing requirement; whether a particular payment attracts TDS depends on the governing provisions. GSTN advisory on TDS registration for scrap and other notified goods.

Business Compliance Checklist for the November GST Updates

Start with the process relevant to your business. New applicants should refresh their document checklist; e-commerce sellers should assess Rule 14B eligibility and operator readiness; existing taxpayers should check contact details, composition categories and cancellation-related return obligations. Businesses dealing in the newly notified goods should separately review GST TDS compliance.

The benefit of these changes will depend on preparation: complete records and prompt verification can help businesses make effective use of the portal’s automated processes.

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The power to arrest under GST has always been one of the more contentious parts of the law. Can the GST Department arrest a person even before tax liability has been formally determined? And if it can, how much evidence must the Commissioner have, before exercising such a serious power?

The Honourable Supreme Court’s ruling in the case of Radhika Agarwal v. Union of India [(2025) 27 Centax 425 (S.C.)], delivered on 27.02.2025 remains the leading authority on these questions. The Honourable Supreme Court clarified an important position: a completed GST assessment or adjudication is not a mandatory prerequisite for arrest under Section 69 of the CGST Act. However, that does not mean arrest can be based merely on suspicion or a preliminary allegation. The Commissioner must have credible material supporting a genuine “reason to believe” that a specified GST offence has been committed.

For businesses, promoters and finance professionals, this distinction is significant. The Honourable Supreme Court has upheld the Department’s power to act before adjudication but at the same time has placed meaningful safeguards around how that power must be exercised.

2. Why Is Section 69 of the CGST Act Important?

Section 69 of the CGST Act empowers the Commissioner to authorise the arrest of a person where there are reasons to believe that the person has committed specified offences under Section 132.

2.1 The Four Arrestable Offences

These offences broadly include four categories of offence, like:

• Supply of Goods or services without an invoice with an intent to evade tax
• Issuing invoices without actual supply
• Availing Input Tax Credit on such invoices or fraudulently without any invoice
• Collecting tax but failing to pay it to the Government beyond three months from the due date

2.2 How Arrest Differs from an Ordinary GST Dispute

For specified offences involving amounts above the statutory threshold, the consequences can extend beyond tax recovery and penalty to criminal prosecution and imprisonment. This makes the power under Section 69 fundamentally different from an ordinary GST demand proceeding.

A normal GST dispute usually follows a recognisable sequence: investigation or scrutiny, issuance of a show cause notice, adjudication, determination of liability and thereafter recovery or appeal.
Arrest can come much earlier and that is precisely where the legal controversy arose.

3. Can GST Arrest Take Place Before Adjudication?

3.1 The Taxpayers’ Argument

Taxpayers had argued that arrest should not normally take place until the alleged tax liability has first been determined through adjudication.

The argument has considerable practical force. If the amount of alleged tax evasion has not yet been finally determined, how can the Department conclude that an offence crossing the prescribed monetary threshold has actually occurred?

3.2 What the Supreme Court Held

The Honourable Supreme Court has clarified that formal crystallisation of tax liability is not essential before arrest under GST law. The Honourable Supreme Court held that where sufficient material already exists to establish, with the required degree of certainty, that an offence under Section 132 has been committed, the Commissioner can exercise the power of arrest without waiting for completion of the assessment or adjudication process. The Court was careful to frame this as an exception rather than the norm. It observed that assessment proceedings would normally quantify the tax evaded and rejected the taxpayers’ argument only “as a general or broad proposition”, recognising that “there could be cases” where the Department is sufficiently certain of the offence and the amount without a formal assessment.

However, this is only half of the principle laid down by the Court.

4. “Reasons to Believe” Cannot Mean Mere Suspicion

4.1 What the Court Required

The more important protection for taxpayers lies in the expression “reasons to believe.”

The Honourable Supreme Court made it very clear that this requirement cannot become a routine formality. The Commissioner cannot simply reproduce the language of Sections 69 and 132 and authorise an arrest.

There must be sufficient degree of material on record supporting the belief that the relevant offence has actually been committed.

The Court put it plainly: the exercise must not rest on mere ipse dixit and an arrest cannot be made merely to investigate whether the statutory conditions are being met. It also held that the principle of benefit of doubt applies and must not be ignored either by the Commissioner or by the Magistrate before whom the arrested person is produced.

4.2 What Kind of Material?

In practice, such material could include invoices, seized documents or goods, bank transactions, statements, e-way bill records, transaction data or other measurable evidence discovered during investigation. The available material should also enable the Department to compute the alleged evasion with a sufficient degree of certainty, since the Court required the computation to be supported by relevant and sufficient material.

In other words, the GST Department does not necessarily need a final adjudication order. But it does need something considerably stronger than an allegation and not mere suspicion.

5. Monetary Thresholds Still Matter

Section 69 operates together with Section 132 of the CGST Act. Therefore, the nature of the alleged offence and the amount involved remain central to the legality of an arrest.
The Honourable Supreme Court recorded the Revenue’s own submission that arrests are made only where the offence is cognizable and non-bailable. It then held that no arrest should be made until the Commissioner can show on the basis of material and evidence that the offence falls within clauses (a) to (d) of Section 132(1) and that the amount involved exceeds Rs. 5 crores.

Accordingly, the Commissioner’s recorded reasons should contain an evidence-based computation demonstrating that the alleged offence falls within the relevant monetary bracket. This does not require the precision of a final assessment order. But it does require a reasoned connection between the evidence gathered and the amount of alleged tax evasion or wrongful ITC.

6. Written Grounds of Arrest Are Another Important Safeguard

6.1 Written Grounds of Arrest

The judgment also reinforces procedural safeguards surrounding GST arrests.

The Honourable Supreme Court held that the grounds of arrest must be given to the arrested person in writing before he or she is produced before the Magistrate. CBIC’s Instruction No. 01/2025-GST dated 13.01.2025 is consistent with this and requires the written grounds to be annexed to the arrest memo with an acknowledgement taken from the arrested person. The Honourable Supreme Court linked such safeguards to the protection of personal liberty and the ability of an arrested person to effectively challenge the arrest or seek bail.

6.2 Safeguards under the Code of Criminal Procedure

The Court further held that the arrest safeguards in the Code of Criminal Procedure apply to arrests by GST officers. These include compliance with the D.K. Basu (supra) guidelines, informing a relative or friend nominated by the arrested person, the right to meet an advocate during interrogation (who may watch from within sight but not within hearing) and the duty to take reasonable care of the arrested person’s health and safety. Since the CrPC has been replaced by the Bharatiya Nagarik Suraksha Sanhita, 2023 with effect from 1 July 2024, these safeguards should now be read with the corresponding BNSS provisions.

6.3 Power to Arrest vs. Justification for Arrest

The Court also endorsed CBIC’s arrest guidelines (Instruction No. 02/2022-23 dated 17.08.2022), which draw on an earlier Supreme Court ruling to state a principle particularly
relevant in GST investigations: the existence of a power to arrest does not automatically justify its exercise. An arrest should not become mechanical merely because the statutory ingredients appear to be satisfied.

7. Protection Against Coerced Payments and Access to Anticipatory Bail

7.1 Coerced Payments

One of the most practical parts of the judgment deals with taxpayers being pressured to pay tax to avoid arrest. After examining the Department’s own data, the Court found some force in this complaint. It held that Section 74(5) gives the taxpayer an option to pay voluntarily and does not permit officers to compel or extract tax by threatening arrest, which would be unacceptable and violative of the rule of law. Where tax is deposited under threat, force or coercion, the taxpayer may approach the courts for a refund, and the Department is expected to take action against the officers concerned.

7.2 Anticipatory Bail

The Court also confirmed that anticipatory bail can be sought whenever there is a reasonable apprehension of arrest based on clear facts, even before any FIR or complaint is filed. This principle was confirmed recently by a Constitution Bench of Five Judges of this Court in Sushila Aggarwal v. State (NCT of Delhi) (2020) 5 SCC 1. Further earlier GST decisions taking a contrary view, including State of Gujarat v. Choodamani Parmeshwaran Iyer and Bharat Bhushan v. Director General of GST Intelligence are not to be treated as binding on this point.

7.3 Limits of the Ruling

At the same time, the ruling has limits that taxpayers should keep in mind. A person summoned under Section 70 is not treated as an accused entitled to protection under Article 20(3) at the stage of interrogation and the Court upheld the constitutional validity of Sections 69 and 70 as ancillary to the power to levy and collect GST under Article 246A.

8. What Counts as “Credible Material”? Guidance from Earlier Supreme Court Rulings

Radhika Agarwal requires the Commissioner’s reasons to believe to rest on material and evidence, not suspicion. The judgment does not list what qualifies. However, earlier rulings of the Honourable Supreme Court on evidence in tax and criminal matters give useful guidance. This matters because GST arrest cases typically rest on three kinds of material: statements recorded under Section 70, statements of other persons in an alleged fake-invoice chain, and records seized during search.

The starting point is an old principle. Suspicion, however strong, cannot take the place of evidence (Umacharan Shaw & Bros. v. CIT, [1959] 37 ITR 271 (SC); Union of India v. H.C. Goel, AIR 1964 SC 364). Radhika Agarwal gives this principle statutory force at the arrest stage. By adopting Arvind Kejriwal v. Directorate of Enforcement, it also held that the belief must be formed on material capable of being admissible evidence, because guilt can only be established on such evidence.

8.1 Statements Made by the Taxpayer

An admission is important evidence but not conclusive. The person who made it can show that it is incorrect (Pullangode Rubber Produce Co. Ltd. v. State of Kerala, [1973] 91 ITR 18 (SC)). The courts have also made clear that the burden cuts both ways. In Bannalal Jat Constructions (P.) Ltd. v. ACIT (Rajasthan High Court, D.B. ITA No. 140/2018, decided on 31.08.2018), the Court refused to accept a retraction made at a belated stage without evidence of duress. A bare allegation of coercion raised much later carries little weight. The practical lesson for taxpayers is this: if a statement is recorded or a payment is made under pressure, the objection should be recorded promptly and in writing, not months later.

8.2 Statements of Co-accused

In fake-ITC investigations, the GST Department often relies on statements of entry operators or other suspects in the chain. The Honourable Supreme Court has consistently held that one co-accused’s confession is not substantive evidence against another. At best, it can lend assurance to a conclusion reached on other evidence (Haricharan Kurmi v. State of Bihar, AIR 1964 SC 1184). The Court applied the same principle to statements recorded by officers under a special statute in Surinder Kumar Khanna v. Intelligence Officer, DRI, (2018) 8 SCC 271, where a conviction resting only on co-accused statements was set aside. An arrest resting only on such statements, with no independent documentary or financial trail, is therefore open to challenge.

8.3 Loose Papers, Diaries and Seized Data

Entries in loose sheets are not “books of account”. Even entries in regular books are not enough by themselves to fix liability on a person without independent corroboration (CBI v. V.C. Shukla, (1998) 3 SCC 410). In Common Cause v. Union of India, (2017) 11 SCC 731, the Court held that loose papers and diary entries of this kind were not even enough to order an investigation against the persons named. Spreadsheets, chats and third-party records seized in GST searches should be assessed with the same caution.

8.4 Disclosure and Cross-examination after Arrest

Once proceedings move to adjudication or prosecution, material not disclosed to the taxpayer cannot be relied on (Kishinchand Chellaram v. CIT, (1980) 125 ITR 713 (SC)). Refusing cross-examination of witnesses whose statements form the basis of the case is a serious flaw that can make the order a nullity (Andaman Timber Industries v. CCE, 2015 (324) ELT 641 (SC)). In prosecution, Section 136 of the CGST Act adds a further condition. A statement recorded during an inquiry is relevant to prove its contents only if its maker is examined as a witness and the court admits the statement in the interests of justice or the maker cannot be produced (for example, because he or she has died or cannot be found).

8.5 In Summary

Together, these rulings give practical content to Radhika Agarwal. The question is not only whether the Commissioner had material, but whether that material was of a kind that could ultimately stand as evidence.

9. What Does the Supreme Court Ruling Mean for Businesses?

The decision creates a carefully balanced position.

9.1 For the GST Department

For the GST Department, it confirms that investigation and arrest powers are not dependent upon completion of adjudication. This can be especially relevant in cases involving suspected fake invoices, fraudulent ITC networks or deliberate tax evasion where authorities believe immediate action is required.

9.2 For Taxpayers

For taxpayers, however, the ruling provides an equally important protection: Section 69 arrest cannot rest on vague suspicion, standard language or unsupported assumptions.
There should be identifiable material, recorded reasons and an evidence-based basis for concluding that the conditions under Section 132 are satisfied.

9.3 Role of the Judiciary

Courts can still examine whether these statutory safeguards were followed, although judicial review does not mean that the High Court will conduct a full reassessment of the underlying GST dispute. The concurring opinion holding that the sufficiency or adequacy of the material behind the officer’s belief is not open to judicial review and that courts should intervene only for manifest arbitrariness or gross non-compliance with statutory safeguards. Arguments on the depth of judicial scrutiny are therefore likely to draw on both opinions.

10. The Key Takeaway

The question after the Honourable Supreme Court ruling is therefore no longer simply:

“Has tax liability been adjudicated before arrest?”

The more relevant question is:

“What credible material did the Commissioner have before forming the reason to believe that an arrest was justified?”

The Supreme Court has preserved the GST Department’s power to arrest before adjudication in appropriate cases, but it has simultaneously emphasised that personal liberty cannot be curtailed on the basis of suspicion alone.

For businesses facing GST investigation proceedings, the quality of the evidence, the quantification of the alleged offence and the reasons recorded by the authorities may therefore become just as important as the eventual tax demand itself.

The post Arrest Under GST Before Adjudication first appeared on N J Jain & Associates.

The Central Board of Indirect Taxes and Customs (CBIC) has accepted the Supreme Court’s August 6, 2026 ruling in Goodluck India Limited & Anr. v. Union of India & Ors., confirming that the omission of Rule 96(10) applies to proceedings that were still pending when the Rule was removed.

CBIC communicated its acceptance through an Office Memorandum dated August 24, 2026. The practical consequence is significant: restrictions under the erstwhile Rule 96(10) cannot continue to be applied merely because the exports or refund claims relate to a period when the Rule was still in force, where the proceedings had not attained finality on the date of its omission.

For exporters with pending show cause notices, refund disputes, appeals or court proceedings involving Rule 96(10), this could provide a substantial route to relief.

What Was Rule 96(10) and Why Did It Create Problems?

Under GST, exports are treated as zero-rated supplies. An exporter can generally export goods or services on payment of IGST and claim a refund of that IGST, subject to the conditions prescribed under the law.

Rule 96(10), however, placed a restriction on this refund route where the exporter had availed benefits under certain specified concessional or exemption notifications relating to inputs.

Put simply, the Rule sought to prevent an exporter from enjoying specified benefits on inputs and simultaneously claiming a refund of IGST paid on exports.

While the objective was to prevent unintended double benefits, its operation created significant complexity. Exporters faced disputes over eligibility, interpretation of exemption notifications and recovery of refunds already sanctioned.

Even CBIC had earlier recognised practical difficulties surrounding Rule 96(10). Circular No. 233/27/2024-GST, dated September 10, 2024, addressed situations where exporters had imported inputs without payment of IGST and Compensation Cess and subsequently sought to regularise their position.

The Government ultimately decided to remove the provision.

Rule 96(10) Was Omitted From October 8, 2024

Through Notification No. 20/2024-Central Tax dated October 8, 2024, Rule 96(10) was omitted from the CGST Rules.

The omission simplified the GST refund framework for exporters. But it immediately raised another question:

What happens to disputes that had already started under Rule 96(10)?

Consider an exporter who had received a show cause notice before October 8, 2024, but whose case was still pending. Or a business whose refund had been denied and whose appeal was yet to be decided.

Could the GST Department continue enforcing a Rule that no longer existed?

That became the central legal issue.

Gujarat High Court: Pending Proceedings Cannot Continue

The Gujarat High Court considered this question in a batch of matters led by Addwrap Packaging Pvt. Ltd.

The Court drew an important distinction. It held that the omission of Rule 96(10) operated prospectively from October 8, 2024 — meaning that the Rule was not treated as though it had never existed.

However, the Court also held that the omission applied to pending proceedings that had not attained finality.

Accordingly, proceedings pending before adjudicating authorities or courts could not continue merely by relying upon the omitted Rule. The Court consequently set aside the impugned proceedings in the cases before it and recognised the exporters’ ability to maintain their IGST refund claims in accordance with law.

The distinction is important: this was not a declaration that every historical action under Rule 96(10) automatically disappeared. The focus was on matters that were still alive when the Rule was omitted.

Supreme Court Settles the Issue in Goodluck India

The dispute eventually reached the Supreme Court in Goodluck India Limited & Anr. v. Union of India & Ors.

On August 6, 2026, the Supreme Court upheld the principle that, in the absence of a saving provision, proceedings pending under Rule 96(10) could not simply continue after its omission.

A “saving clause” is essentially a legal provision that expressly preserves existing rights, liabilities or proceedings even after the underlying law is amended or removed.

No such saving provision accompanied the omission of Rule 96(10).

The Supreme Court relied upon the Constitution Bench ruling in Kolhapur Canesugar Works Ltd. v. Union of India, which had examined the legal effect of omission of a statutory rule. The principle is that where a rule is omitted without an appropriate saving mechanism, pending proceedings under that rule may not survive merely because they were initiated before its omission.

The Court also noted the policy background: Rule 96(10) had itself been removed because its operation was resulting in unnecessary complications without achieving the intended benefit.

CBIC Has Now Accepted the Supreme Court Position

The latest and perhaps most commercially relevant development is CBIC’s acceptance of the Supreme Court ruling.

According to the Office Memorandum dated August 24, 2026, the GST Policy Wing examined the judgment after receiving a reference from CBIC’s Legal Cell and concluded that the Supreme Court decision may be accepted.

CBIC also recognised an important structural point in GST law.

After the Supreme Court’s earlier decision in Kolhapur Canesugar Works, specific saving provisions were introduced in laws such as Central Excise and Customs to preserve proceedings despite amendments or omissions of rules.

No comparable saving provision currently exists under GST law for Rule 96(10).

This makes CBIC’s acceptance especially relevant for pending litigation.

Which Exporters Should Revisit Their GST Refund Cases?

Businesses should consider reviewing cases involving Rule 96(10) that were pending as on October 8, 2024, particularly where:

• a show cause notice was pending for adjudication;
• a refund rejection or recovery order was under appeal;
• proceedings were pending before a High Court or another judicial forum; or
• the Department was seeking recovery of an IGST refund by relying principally on Rule 96(10).

The precise benefit will still depend on the facts and procedural stage of each case. For example, a matter that had already attained finality before the omission may stand on a different footing from an appeal or adjudication that remained pending.

That distinction should be evaluated carefully before taking action.

What Does This Mean for GST Refund Litigation?

The larger significance of the development goes beyond one refund provision.

For exporters, the immediate takeaway is that pending Rule 96(10) disputes now have considerably greater legal certainty. With both the Supreme Court ruling and CBIC’s acceptance of that position, authorities should not continue applying the omitted restriction to qualifying pending proceedings merely because the underlying export took place when Rule 96(10) existed.

It may therefore be worthwhile for exporters to identify historical Rule 96(10) cases, examine their status as on October 8, 2024 and determine whether the Supreme Court ruling can be relied upon before the relevant adjudicating or appellate authority.

For businesses with significant export refunds tied up in litigation, that review could have a direct working-capital impact.

Key Takeaway

Rule 96(10) disappeared from the CGST Rules in October 2024. The remaining uncertainty was whether the litigation created by it would continue.

The Supreme Court has now clarified that in the absence of a saving clause, the omitted Rule cannot continue to govern proceedings that were still pending when the omission took effect. CBIC’s subsequent acceptance of that ruling strengthens the position further.

For exporters, the issue is therefore no longer simply whether they had once fallen within Rule 96(10).

The more important question is:

Was their Rule 96(10) dispute still pending on October 8, 2024?

If yes, the latest development deserves a fresh look.

The post Rule 96(10) GST Refund Relief: CBIC Accepts Supreme Court Ruling for Pending Proceedings first appeared on N J Jain & Associates.

Both arise from the same investigation. Both are placed before the same adjudicating authority. They are even heard together.

Now imagine that the High Court stays proceedings under one of those notices.

Does the other notice automatically get stayed too?

It may seem intuitive that proceedings arising from the same investigation should move together. But the Delhi High Court has clarified that this is not necessarily how the law works.

In A V International & Anr. v. Additional Director General, Directorate of Revenue Intelligence & Ors., decided on August 7, 2026, the Delhi High Court held that two Show Cause Notices can retain their separate legal identity even when they originate from the same investigation, are assigned to the same adjudicating authority and are heard together.

As a result, a stay granted in relation to one SCN will not automatically stop adjudication of the other unless the court order expressly says so.

For businesses dealing with multiple tax notices arising from one investigation, the judgment contains an important lesson: connected does not necessarily mean legally inseparable.

What Happened in This Case?

A V International was engaged in importing and trading signage materials, primarily from China and Taiwan.

In 2016, the Directorate of Revenue Intelligence (DRI) initiated an investigation alleging mis-declaration and undervaluation of imported goods. Searches followed, certain goods were seized and those goods were subsequently provisionally released against a bond and bank guarantee.

The investigation eventually resulted in not one, but two Show Cause Notices.

The first SCN, issued on March 27, 2017, related specifically to the goods seized during the investigation. It proposed confiscation of those goods along with consequential penalties.

Almost three years later, a second SCN, dated May 11, 2020, was issued in relation to the petitioners’ earlier imports. This notice proposed recovery of customs duty, along with interest and penalty under Section 28 of the Customs Act, 1962.

Although both notices flowed from the same broader investigation, they were not seeking exactly the same relief.

That difference eventually became crucial.

Why Did the Two Proceedings Appear to Be One?

In October 2020, the Principal Commissioner of Customs (Import), ICD Tughlakabad was appointed as the common adjudicating authority for both notices.

Common personal-hearing notices were subsequently issued and both matters were taken up together.

From a taxpayer’s perspective, therefore, the two proceedings understandably appeared closely intertwined.

The position became more complicated after the Supreme Court’s decision in Canon India Pvt. Ltd. v. Commissioner of Customs. CBIC subsequently directed certain matters to be placed in the Call Book. Following legislative amendments introduced by the Finance Act, 2022, those matters were later taken out of the Call Book and adjudication recommenced.

The taxpayer then challenged the second SCN before the Delhi High Court, arguing, among other things, that adjudication had become time-barred under Section 28(9) of the Customs Act.

On December 14, 2023, the High Court stayed further proceedings under the second SCN.

And this is where the central controversy began.

The First SCN Was Still Adjudicated

Despite the stay relating to the second SCN, the adjudicating authority proceeded with the first SCN and passed an Order-in-Original on February 1, 2024.

The taxpayer challenged this as well.

Its argument was fairly straightforward:

If both notices came from the same investigation, were placed before the same adjudicating authority and were being heard together as part of what was effectively a common adjudication, how could the Department suddenly separate them and proceed with one while the other remained stayed?

The Delhi High Court did not accept that argument.

Same Investigation Does Not Mean Same Proceeding

The Court focused on the legal character of each notice.

The first SCN concerned the seized goods and proposed confiscation and penalties.

The second SCN concerned earlier imports and proposed recovery of customs duty, interest and penalty under Section 28.

Therefore, although the two notices shared a common investigative background, each had a separate subject matter and an independent statutory foundation.

The Court held that administrative convenience does not change this position.

Appointing the same adjudicating authority, issuing common hearing notices or hearing both matters together does not merge two distinct SCNs into one legal proceeding.

In other words, procedural coordination cannot erase substantive legal independence.

A Stay Order Means What It Says

The second and perhaps more important part of the judgment concerns the interpretation of interim orders.

The stay granted by the High Court in December 2023 expressly related to proceedings under the second SCN.

It did not say that proceedings under the first SCN were stayed.

It did not restrain the adjudicating authority from deciding the first SCN.

The Court therefore held that the scope of an interim order cannot be enlarged merely by implication.

This is an important practical point.

If a taxpayer has three connected notices and obtains a stay referring specifically to only one of them, it cannot automatically be assumed that the remaining two are also protected.

The wording of the relief sought — and ultimately granted — becomes critical.

What About Natural Justice and the Right to Challenge the Order?

The taxpayer had also argued that relied-upon documents had not been supplied and that adequate opportunity of hearing had not been provided.

The High Court, however, declined to interfere with the Order-in-Original on those grounds.

It noted that these issues involved examination of the adjudication record and could appropriately be considered by the CESTAT through the statutory appellate mechanism.

The Court reiterated the general principle that where an effective alternative remedy is available, writ jurisdiction under Article 226 is ordinarily exercised only in exceptional circumstances.

The taxpayer was therefore given liberty to pursue its appellate remedy before CESTAT.

The Limitation Issue Was Left Open

Another interesting part of the dispute involved the time limit for adjudication under Section 28(9) of the Customs Act.

The taxpayer had questioned whether the proceedings had become time-barred and whether an extension granted in March 2023 was valid, particularly when the extension had allegedly not been communicated.

The High Court deliberately did not decide these questions on merits.

Issues involving limitation, the Call Book mechanism, the extension granted by the authority and the effect of its non-communication were kept open for consideration before the appropriate forum.

This is important because the judgment should not be read as settling every issue surrounding delayed Customs adjudication. Its primary significance lies elsewhere: the independent identity of separate SCNs and the limited reach of an interim stay.

Why This Decision Matters Beyond Customs

Although the case arose under the Customs Act, its reasoning can have wider relevance — including under GST.

It is common for a single GST investigation to lead to multiple notices covering different tax periods or different issues under Sections 73 or 74 of the CGST Act.

The reasoning discussed in the source suggests that each such SCN may continue to constitute an independent proceeding. Therefore, a stay concerning one tax period or one notice may not automatically halt adjudication of every other notice arising from the same investigation.

Section 75(1) of the CGST Act also deals with exclusion of the period during which issuance of an order is stayed by a court or tribunal when computing the time limit for orders under Sections 73 and 74.

For taxpayers facing multiple connected proceedings, this makes the precise scope of interim protection particularly important.

Key Takeaways for Taxpayers

The Delhi High Court’s decision brings out four practical principles:

• Multiple SCNs arising from the same investigation do not automatically become one proceeding. Their legal character depends on the subject matter, statutory basis and relief proposed in each notice.
• A common adjudicating authority or joint hearing is largely an administrative arrangement. It does not necessarily require the notices to culminate in one composite order.
• A stay of one SCN does not automatically stay another. Courts will generally read an interim order according to its actual wording rather than extend it by implication.
• When seeking interim relief, drafting matters. If a taxpayer wants protection across several connected notices or proceedings, the relief sought — and the order ultimately obtained — should expressly cover them.

The Larger Lesson

Tax investigations frequently create a web of connected proceedings. They may share facts, documents, officers and hearing dates.

But legally, each notice may still have a life of its own.

That is the central message of this ruling.

For businesses and tax professionals, the practical question is therefore not simply:

“Did all these notices arise from the same investigation?”

The more important questions are:

What does each SCN independently allege? What statutory provision does it invoke? And exactly which proceedings does the court’s stay order cover?

In tax litigation, that distinction can determine whether an adjudication genuinely stands halted — or continues despite a related matter being before the court.

The post If Two Show Cause Notices Come From the Same Investigation, Does a Stay on One Stop the Other? first appeared on N J Jain & Associates.

At first glance, the answer may seem obvious.

The tenant uses the services. The tenant bears the cost. The tenant is GST-registered.

But GST law asks a slightly different question:

Who is legally liable to pay for the maintenance service?

That distinction can decide whether the tenant is genuinely the recipient of the service — and whether the Input Tax Credit claimed on such maintenance charges can withstand scrutiny.

A Common Commercial Arrangement

Consider a simple example.

A developer has allotted commercial premises to an individual owner. The owner subsequently leases those premises to a GST-registered company.

Maintenance of the commercial complex — including security, cleaning, common-area upkeep and similar services — is provided by the developer or maintenance agency.

Now suppose the owner is not registered under GST, while the tenant is.

If the developer raises the maintenance invoice in the owner’s name, the GST charged may effectively become a cost because the owner cannot claim ITC.

Naturally, the parties may ask:

Why not let the tenant pay the maintenance directly and have the invoice issued in the tenant’s GSTIN?

Commercially, that appears efficient.

Legally, however, direct payment is only part of the story.

Who Is the “Recipient” Under GST?

The answer begins with Section 2(93) of the CGST Act.

Where consideration is payable for a supply, the law generally treats the person liable to pay that consideration as the recipient.

This is important because the person actually making the payment and the person legally liable to make the payment can be different.

Section 2(31), which defines “consideration”, recognises that payment may come from the recipient or from another person.

That means the mere fact that a tenant pays maintenance charges does not automatically make the tenant the recipient of the maintenance service.

The first question should therefore be:

What do the underlying agreements say?

If the allotment agreement or maintenance agreement makes the property owner liable to the developer for maintenance charges, the owner may continue to be the recipient even if the tenant pays the amount directly on the owner’s behalf.

Paying the Bill Is Not the Same as Receiving the Supply

This is where many commercial arrangements can create GST risk.

Suppose the owner remains contractually liable to pay maintenance charges but the lease deed says that the tenant will directly pay those charges during the tenancy.

That may only change who makes the payment.

It may not change who owes the payment to the developer.

In such a case, the tenant could effectively be discharging the owner’s liability.

The fact that the tenant physically uses the building facilities also does not by itself settle the matter. Usage is relevant commercially, but GST entitlement depends on the underlying supply relationship and statutory conditions.

This distinction becomes particularly important when Input Tax Credit is involved.

Can the Tenant Claim ITC Merely Because the Invoice Bears Its GSTIN?

Not necessarily.

A tax invoice is important evidence for claiming ITC, but an invoice cannot by itself create a supply relationship that does not otherwise exist.

Section 16 of the CGST Act requires the registered person claiming credit to satisfy the prescribed conditions, including receiving the relevant supply.

Therefore, if all the underlying documents show that maintenance services are contractually supplied to the owner, simply replacing the owner’s name with the tenant’s name and GSTIN on the invoice may invite questions.

During scrutiny, the Department may look beyond the invoice and examine:

• the allotment agreement;
• the lease deed;
• the maintenance agreement;
• correspondence between the parties;
• accounting entries; and
• the actual contractual liability for the maintenance charges.

If those documents tell a different story from the invoice, the tenant’s ITC position can become vulnerable.

Can the Arrangement Be Structured Differently?

Yes — but the commercial relationship itself should change, not merely the invoice.

A more defensible structure may involve a genuine tripartite agreement between:

the developer or maintenance agency, the property owner, and the tenant.

Under such an arrangement, the parties may prospectively agree that during the lease period:

the maintenance service will be provided directly to the tenant;

the tenant will itself be liable to the developer for the maintenance consideration; and

the developer will bill the tenant accordingly.

This is materially different from the owner merely telling the developer:

“Please collect the amount from my tenant and put the tenant’s GSTIN on the invoice.”

In the latter case, the owner may still remain the person legally liable for the payment. In the former, the contractual relationship itself is altered so that the tenant assumes direct liability.

The Documents Must Tell the Same Story

A tripartite agreement alone should not be treated as a magic solution.

The allotment terms, lease deed, maintenance arrangement, invoicing practice and accounting records should all be broadly consistent.

For example, if the original allotment agreement states that the owner remains unconditionally liable for maintenance, while a later document says the tenant alone is liable for the same charges, that inconsistency could itself invite scrutiny.

Similarly, if the documents claim that the tenant is the direct recipient but the developer continues maintaining the account in the owner’s name and legally looks to the owner for recovery, the substance of the transaction may not support the invoicing structure.

Under GST, documentation is strongest when it reflects the way the parties actually conduct themselves.

There May Also Be an Impact on the Value of Renting

There is another angle that businesses should not ignore.

Section 15(2)(b) of the CGST Act provides for inclusion in the value of a supply of certain amounts that the supplier is liable to pay but which are incurred by the recipient.
Accordingly, if the landlord is legally responsible for maintenance but the tenant pays that amount on the landlord’s behalf, a separate question may arise about whether such payment should form part of the value of the renting service.

This makes the drafting of the lease important.

The agreement should clearly indicate whether maintenance is:

part of the landlord’s obligation relating to the rented premises; or

a separate service for which the tenant independently contracts and becomes directly liable.

The answer can affect not only ITC, but potentially the GST valuation of the leasing arrangement itself.

Prospective Restructuring Is Safer Than Retrospective Invoice Changes

Where historical documents clearly show the owner as the recipient of the maintenance service, retrospectively changing invoices merely to enable the tenant to claim ITC can be difficult to defend.

A safer approach is generally prospective.

The parties can review the existing lease, allotment and maintenance arrangements and, where commercially and contractually permissible, execute an appropriate amendment or tripartite arrangement from a defined future date.

Invoices, ledgers and payment records can then follow the revised contractual structure consistently.

This also protects the maintenance service provider.

A supplier should ideally have a sound contractual basis before issuing a B2B invoice in a particular GSTIN, rather than doing so merely because one party would prefer to avail ITC.

So, Who Is the Real Recipient?

There is no universal answer based simply on who occupies the property or who makes the payment.

The real question is:

Who is legally liable to the maintenance service provider for the consideration?

If the owner remains liable and the tenant merely pays on the owner’s behalf, the owner may continue to be the recipient.

If the arrangement is genuinely restructured so that the tenant independently becomes liable to the maintenance provider, the tenant has a stronger basis to be treated as the recipient and claim ITC, subject to the other conditions under GST law.

Key Takeaways

For businesses, landlords and tenants dealing with GST on commercial lease maintenance charges, the practical lessons are straightforward:

• Payment alone does not determine the recipient under GST.
• The contractual liability to pay is central to the analysis.
• An invoice bearing the tenant’s GSTIN is not enough if the agreements still identify the owner as the recipient.
• A genuine prospective tripartite arrangement can strengthen direct invoicing to the tenant.
• Lease deeds, maintenance agreements, invoices and accounting records should all tell the same commercial story.
• Maintenance payments may also have implications for valuation of the renting service under GST.

The larger lesson is simple:

GST follows the underlying transaction, not merely the name appearing on the invoice.

For taxpayers looking to preserve Input Tax Credit on maintenance charges for leased premises, getting the contractual structure right is therefore just as important as getting the invoice right.

The post GST on Maintenance Charges for Leased Premises: Who Is the Actual Recipient? first appeared on N J Jain & Associates.

And for all this stuffs we pay subscription.

As a result invoice comes from an overseas technology company.

And that is where the tax story begins.

What often looks like a simple monthly software expense can actually raise questions under GST, Reverse Charge Mechanism, OIDAR rules and Income-tax withholding provisions.
So, if your business pays for ChatGPT or another overseas AI platform, then there arise many questions

• who pays GST?
• Can the business claim Input Tax Credit?
• Is TDS required?
• And does it make a difference whether you are using the tool personally or commercially?

So let us understand that how does GST see a ChatGPT Subscription, where understanding of all these questions can be captured:

For tax purposes, ChatGPT is not looked merely as an “AI tool”.

The most relevant element for taxation is how the services are delivered.

Standard AI platforms are accessed online, operate through digital infrastructure, generate outputs automatically and involve little or no human intervention in delivering each individual response.

These characteristics bring such services within the broad framework of Online Information and Database Access or Retrieval services — commonly known as OIDAR services under the IGST Act.

This category is important because India has specific GST rules for digital services supplied from outside India to customers located in India.

And the tax treatment changes significantly depending on who is using the AI service.

Suppose an individual in India purchases an AI subscription for personal use and is not registered under GST.

In such a case, the overseas digital service provider generally has the responsibility to collect and discharge IGST under the mechanism applicable to OIDAR services supplied to an unregistered customer in India.

So, for the user this is relatively straightforward. You purchase the subscription, tax is charged as applicable, and there is no Input Tax Credit because the service is being consumed personally.

Now, suppose an Indian company, LLP, CA firm, software developer or another GST-registered business purchases an AI subscription from an overseas vendor.

In such a case, the foreign vendor may issue an invoice without charging Indian GST. But this does not necessarily mean that there is no GST Liability.

The Indian business may instead be required to pay IGST itself under the Reverse Charge Mechanism (RCM) as an import of service. And the applicable GST rate would be 18%.

Let’s Consider an Example:

If an Indian company spends ₹10 lakh annually on AI subscriptions or API access, an 18% RCM liability would amount to ₹1.8 lakh.

Therefore, the company would pay that GST through the prescribed mechanism and, if the service is used for business and all ITC conditions are satisfied, then it may generally
claim the corresponding Input Tax Credit.

Now, this is where the Economics becomes more interesting

For an eligible business, the GST paid under RCM may be largely tax-neutral because the same amount can potentially come back as ITC.

Whereas, for a personal user, there is no such credit.

Isn’t this amazing: Same AI tool, but different tax outcome, based on its user and usage.

What About ChatGPT API and Enterprise Plans?

Many Indian technology companies are now integrating foreign AI APIs into their own software, customer-service platforms, automation tools and internal applications. Purchasing of enterprise workspace for dozens or hundreds of employees is also increasing over the period.

From, a GST perspective the underlying logic for a ChatGPT subscription or integration of API and other enterprise plans remains unchanged: Where a GST-registered Indian entity procures electronically supplied AI services from an overseas provider, the transaction may constitute an import of service and attract GST under RCM, subject to the precise facts and contractual arrangement. This awakens Businesses to look beyond the corporate card transaction.

On the other hand, the accounting and tax teams should tighten up their seats to know about:

• who the contracting entity is;
• where the vendor is located;
• whether GST has already been charged;
• whether RCM applies;
• whether eligible ITC has actually been claimed.

Otherwise, an innocent-looking SaaS or AI subscription can turn up into a turbulence resulting into a recurring compliance gap.

Then comes a Bigger Question: Is TDS Deduction required?

A payment from an Indian business to a foreign AI service provider can also raise questions under the Income-tax Act and the relevant Double Taxation Avoidance Agreement (DTAA).

The core issue is whether payment can be characterised as Royalty or Fees for Technical Services / Fees for Included Services.

The distinction matters because such characterisation can affect withholding obligations under Section 195 of Income Tax Act, 1961 and SI No. 17 of section 393(2) of Income Tax Act,2025

A view can be taken that an ordinary access to an AI platform — without transfer of source code, copyright or proprietary technology — may generally be distinguished from a royalty payment.

In practical terms, paying to use ChatGPT is not the same thing as acquiring ownership or rights over the technology. Instead, you are buying access and not the model.

Hence, understanding this difference is important in terms of TDS under Income Tax Act.

Now, comes a fun fact that whether a response from AI tends to be a Technical Service?

This is where the discussion becomes more interesting.

Traditional technical-service taxation often involves some element of specialised human intervention or expertise.

But with AI, the response is produced automatically by software. There may be no engineer, consultant or subject-matter expert, personally delivering the response at the other end.

Therefore, fully automated AI services may, not automatically fit the traditional characterisation of Fees for Technical services. Further, where the payment for AI services is not taxable as Royalty or FTS/FIS and the foreign provider does not have a Permanent Establishment in India, then Section 195 of Income Tax Act,1961 withholding may not necessarily arise.

But this is one area where businesses should resist applying a blanket rule and have a check over the contract terms, service package, jurisdiction of the provider and DTAA rules.

So, there is nothing wrong in saying that GST and Income-tax rules look not only at what was purchased, but also at who purchased it, from whom, how it is delivered and what rights or services the contract provides.

What should Indian Businesses Do?

For most businesses, the compliance is not complicated if the process is set up correctly.

The bigger risk is simply forgetting that these subscriptions are cross-border procurements.

Businesses using ChatGPT, AI APIs or similar overseas digital platforms should:

• maintain proper vendor invoices
• ensure the correct legal entity
• Whether GSTIN are reflected where relevant
• Evaluate RCM Liability
• Claim Eligible ITC, and
• Review whether any foreign-remittance or withholding-tax compliance is required

As AI spending grows, what was once a ₹2,000 monthly software subscription can quickly become a much larger enterprise technology cost. At that point treating it as “just another credit-card expense” is no longer enough.

The Bigger Takeaway

AI may actually feel borderless and truly it is, but Tax Law is not.

A prompt may travel to a foreign server and return an answer in seconds, but the payment behind that interaction can still trigger very traditional questions around GST, imports of services, reverse charge, ITC, royalty and withholding tax.

So, the next time someone in your organisation says:

“We just bought a ChatGPT subscription”

The Finance team rather than merely treating it as a business expense, should wake up and ask one more question:

“Personal usage, Business Subscription or API?”

Because from tax perspective, the detail could change everything

What You Need to keep in Mind

Overseas AI subscriptions such as ChatGPT may fall within the OIDAR / digitally supplied services framework under GST.

For unregistered personal users, GST may generally be collected by the overseas provider under the applicable mechanism.

GST-registered Indian businesses may need to pay IGST under RCM on overseas AI services and can potentially claim eligible ITC.

Standard AI access does not automatically mean a royalty payment for Income-tax purposes; the rights granted under the contract matter.

TDS under Section 195 should be evaluated based on the nature of the payment, the relevant DTAA and the foreign service provider’s tax position.

As enterprise adoption of AI grows, businesses should bring AI subscriptions and API payments into their regular GST and foreign-remittance compliance processes.

The post Using ChatGPT for Work? Here’s How AI Subscriptions Are Taxed in India first appeared on N J Jain & Associates.

For more than two weeks, auctions of isabgol, or psyllium seed, at the Unjha Agricultural Produce Market Committee (APMC) in Gujarat have remained suspended amid differing tax positions being encountered in Gujarat and Rajasthan. The immediate concern for traders is straightforward: if purchases presently treated as exempt are subsequently held liable to 5% GST, the resulting tax exposure could run into crores of rupees.

The dispute, however, is not merely about a 5% tax rate. It raises a larger issue concerning certainty and uniformity under GST, particularly where the same agricultural commodity moves through an interstate supply chain.

Why Isabgol Trade at Unjha Matters

Unjha is a major centre for the processing and trading of psyllium. According to industry estimates reported by The Times of India, approximately 65 processing units in Unjha handled around 1.9 lakh metric tonnes of stock in FY 2025-26. Of this, nearly 1.6 lakh metric tonnes originated from Rajasthan, while around 15,400 metric tonnes came from Gujarat. The annual value of the trade at Unjha is estimated at approximately ₹5,000 crore.

This explains why a difference in GST treatment between the two states can have consequences far beyond a classification dispute.

Farmers sell the crop, traders procure it through APMC auctions, processing units extract psyllium husk, and a substantial part of the finished product enters the export market. When uncertainty arises at the first stage of this chain, the effect travels through procurement, processing, working capital and export commitments.

With auctions suspended, processors face shortages of raw material, exporters face delays in meeting commitments and farmers encounter uncertainty at a time that also coincides with the sowing season.

What Does the GST Law Say on Isabgol?

The starting point is Heading 1211 of the Customs Tariff, which covers plants and parts of plants, including seeds and fruits, of a kind used primarily in perfumery, pharmacy or for similar purposes.

Under the present rate structure, Notification No. 9/2025-Central Tax (Rate), dated 17 September 2025, covers such goods under Heading 1211 when they are frozen or dried. Entry 71 of Schedule I attracts GST at 5%, comprising 2.5% CGST and 2.5% SGST.

On the other hand, Entry 87 of Notification No. 10/2025-Central Tax (Rate), also dated 17 September 2025, exempts goods under Heading 1211 when they are fresh or chilled.

The broad framework is therefore relatively clear:

Fresh or chilled isabgol seed — Nil GST.
Frozen or dried isabgol seed — 5% GST.

Indeed, CBIC’s GST rate FAQs have historically stated the same position: isabgol seeds fall under Heading 1211; fresh seeds attract Nil GST, while dried or frozen seeds attract 5%.

The difficulty lies not in the rates themselves, but in determining when an isabgol seed should legally be regarded as “fresh” and when it becomes “dried”.

Gujarat AAR: Raw and Unprocessed Isabgol Is ‘Fresh’

An important development came on 29 May 2026 when the Gujarat Authority for Advance Ruling delivered its decision in In re Jigneshkumar Narayandas Patel (Akshar Traders).

The applicant proposed to procure psyllium seeds directly from farmers through APMC auctions and supply them to processing units without undertaking drying, freezing, crushing or any other processing. The seeds were to remain in substantially the same condition in which they were procured.

The Gujarat AAR held that such psyllium seeds could be considered “fresh”.

A significant part of the Authority’s reasoning was that no artificial or intentional drying, dehydration, freezing or processing was undertaken. The seeds continued in their natural form from procurement until their subsequent supply to processing units. The Authority applied the principles concerning the distinction between fresh and dried produce discussed in Circular No. 169/19/2021-GST dated 6 October 2021.

Consequently, the AAR held that raw and unprocessed psyllium seeds procured through the APMC mechanism were covered by Entry 87 of Notification No. 10/2025 and were liable to Nil GST.

The Authority also considered an alternative argument that the product could be exempt as “goods of seed quality” under Entry 77 of Chapter 12. It did not accept that route, holding that the specific entry for products falling under Heading 1211 would prevail over the more general entry for goods of seed quality.

This distinction is important. The exemption was not granted merely because isabgol is an agricultural seed. It was granted because the product, on the stated facts, qualified specifically as fresh psyllium seed falling under Heading 1211.

Then Why Has the Market Still Come to a Halt?

The difficulty arises because the Gujarat ruling has not translated into uniform treatment across the supply chain.

Industry participants have reported a differing position in Rajasthan, where 5% GST is being associated with isabgol seed transactions that Gujarat traders consider to be supplies of fresh, exempt seed. This mismatch has become commercially significant because Rajasthan is the principal source of the raw material processed at Unjha.

A trader purchasing Rajasthan-origin material therefore faces an uncomfortable question: should the transaction be treated as exempt based on the nature of the commodity and the Gujarat AAR’s reasoning, or should 5% GST be factored in to protect against a future demand?

In tax matters, uncertainty can sometimes be more disruptive than the rate itself. A business can price a known tax cost. It is considerably more difficult to price the possibility that a transaction treated as exempt today may be challenged several months or years later along with interest and consequential exposure.

The Limitation of an Advance Ruling

This episode also highlights an important structural limitation of the advance ruling mechanism.

Under Section 103 of the CGST Act, an advance ruling is binding only on the applicant who sought the ruling and on the concerned or jurisdictional officer in respect of that applicant. It does not automatically become a binding ruling for every trader dealing in the same commodity across India.

Therefore, although the Gujarat AAR provides useful legal reasoning and persuasive guidance, it does not by itself eliminate the possibility of a different interpretation being adopted in another jurisdiction or in the case of another taxpayer.

This is precisely where an otherwise technical classification matter can turn into a broader policy problem.

GST was designed around the principle of a common national market. Where an identical commodity, moving in substantially the same condition, faces materially different tax treatment depending upon the state from which it is procured, the resulting uncertainty affects interstate trade itself.

‘Fresh’ Should Be Determined by the Product, Not Merely by Terminology

There is also a practical aspect that deserves attention.

Agricultural commodities do not always fit neatly within everyday descriptions such as “fresh” and “dry”. A seed may naturally lose moisture after harvesting and during storage without undergoing an industrial drying process. At the same time, the trade may colloquially describe a commodity as “dry” even though no deliberate drying or dehydration has taken place.

The Gujarat AAR’s reasoning therefore offers an important analytical distinction: the relevant inquiry should focus on the actual treatment of the goods.

Where isabgol seed is procured from farmers in its natural form and no artificial drying, dehydration, freezing or processing is undertaken, the case for treating it as fresh is materially different from a situation where the commodity has deliberately undergone a drying or preservation process.

Such a factual distinction is more workable than allowing the tax treatment to depend simply on commercial terminology.

Working Capital and Export Competitiveness Are Also at Stake

The issue assumes further significance because the isabgol industry is heavily export-oriented.

Even where GST paid on inputs may ultimately be available as credit or refundable in the case of zero-rated exports, the tax can remain blocked as working capital until the credit or refund is realised. Industry representatives had raised this concern even before the present dispute, pointing to substantial capital being locked up because processors were paying GST on seed purchases in order to avoid classification disputes.

For an export-oriented commodity operating on large volumes, the difference between an exempt procurement and a 5% taxable procurement is therefore not merely an accounting entry. It can materially influence liquidity, financing costs and competitiveness.

What the Industry Needs Now

The immediate requirement is not another state-specific interpretation, but a clear and uniform position capable of being followed across jurisdictions.

The legal framework already distinguishes fresh isabgol from dried or frozen isabgol. The Gujarat AAR has now provided detailed guidance on when natural and unprocessed psyllium seed can qualify as fresh. Yet the present disruption demonstrates that an interpretation limited to an individual advance ruling may not be sufficient for an interstate agricultural market.

Industry representatives have accordingly sought intervention at the Central Government and GST Council level. Public reporting as of mid-August 2026 indicates that traders are awaiting a uniform clarification before normal operations can fully resume.

A central clarification explaining the parameters for distinguishing natural, unprocessed isabgol seed from deliberately dried seed could considerably reduce the present uncertainty.

Conclusion

The Unjha situation is a useful reminder that GST certainty depends not only on prescribing tax rates, but also on ensuring consistent interpretation of the conditions attached to those rates.

On paper, the position appears simple: fresh isabgol is exempt and dried or frozen isabgol attracts 5% GST. In practice, however, the absence of a uniform understanding of what constitutes “fresh” has been sufficient to interrupt a ₹5,000-crore trading ecosystem.

The Gujarat AAR has provided a reasoned basis for treating natural, raw and unprocessed psyllium seed as fresh where no deliberate drying or processing takes place. The next step should be to ensure that similarly situated transactions receive consistent treatment across state borders.

For businesses, the larger lesson is equally important: where taxability depends upon the physical condition or processing of a commodity, documentation of procurement, storage and processing practices becomes critical. For policymakers, the present dispute underlines the need for clarification before a classification issue becomes a supply-chain issue.

The post GST Ambiguity Brings Isabgol Trade to a Halt: Why the ‘Fresh vs Dried’ Question Needs Urgent Clarity first appeared on N J Jain & Associates.