GSTR-3B Due Date Extended for March 2026
The Government granted an extension for filing of GSTR-3B for March 2026, considering system-related constraints and transitional compliance challenges at the year-end.
Such extensions are typically provided to ease compliance burden during peak periods; however, taxpayers must note that interest implications may still apply depending on notification wording. It is advisable to complete filings within the extended timeline to avoid disputes relating to delayed payment or ITC availment.
Operationalisation of National Appellate Authority for Advance Ruling (NAAR)
A significant structural development during April 2026 is the operationalisation of the National Appellate Authority for Advance Ruling through the Principal Bench of the GST Appellate Tribunal.
This authority has been empowered to resolve conflicting advance rulings issued by Appellate Authorities of different States.
The decisions of this authority are binding across the country and are expected to bring much-needed uniformity in interpretation of GST law and reduce litigation arising from divergent rulings.
GSTN Advisory – Appeal Filing Where Order Reflects NIL Demand
GSTN issued an important clarification addressing practical difficulties in filing appeals where the adjudication order reflects NIL demand.
It has been clarified that even in cases where no tax demand arises, taxpayers may still file appeals (for example, against adverse findings or denial of refund/ITC). The system has been aligned to allow such filings, ensuring that substantive rights of appeal are not curtailed due to technical system limitations.
This is particularly relevant in cases involving:
- ITC eligibility disputes
- Refund rejections
- Classification issues without demand
GSTN Advisory – Editable Pre-deposit in Form APL-01
GSTN has introduced functionality allowing editing of pre-deposit details in Form APL-01 at the time of filing appeals.
Previously, taxpayers faced issues where incorrect tagging or minor errors in pre-deposit amounts could lead to rejection or defects. The new update enables correction before final submission, ensuring accurate reflection of payments and smoother appeal processing.
This aligns with the broader objective of reducing procedural defects and facilitating ease of litigation compliance.
Invoice Management System (IMS) – Offline Utility Launched
GSTN has launched an offline utility for the Invoice Management System (IMS) to streamline invoice-level reporting and reconciliation.
The utility enables taxpayers to Upload and validate invoice data offline, Perform bulk reconciliation and reduce dependency on portal availability
This is a significant step towards system-driven compliance and data accuracy, especially for large taxpayers dealing with high transaction volumes.
GSTN Advisory on Pre-deposit for Appeals
The GST Network (GSTN), through Advisory No. 652, has issued important clarifications regarding the treatment of payments made through Form DRC-03 in the context of appeal filings.
It has been clarified that payments made using DRC-03 are not automatically linked to demand orders in the system. As a result, such payments may not be considered as valid pre-deposit for the purpose of filing an appeal unless they are properly tagged.
To address this issue, taxpayers are required to file Form DRC-03A to ensure that the payment is correctly linked to the relevant demand order. Once appropriately tagged, the payment will be reflected in the Electronic Liability Register.
This clarification is crucial for ensuring compliance with pre-deposit requirements and for avoiding procedural issues during the appeal process.
Case Laws
1. Consolidated Show Cause Notices Covering Multiple Financial Years
Case: M/s CHIMNEY HILLS EDUCATION SOCIETY & Ors. v. Commissioner of Central Tax, Bengaluru
The High Court of Karnataka considered whether the GST department can issue a single consolidated show cause notice under Sections 73 or 74 of the Central Goods and Services Tax Act, 2017 covering multiple financial years, or whether separate notices are required for each year. The case arose after several taxpayers challenged such consolidated notices, and a Single Judge had earlier quashed them on the ground that GST proceedings must be financial-year specific. On appeal, the Division Bench reversed that view and upheld the validity of common notices spanning multiple tax periods.
The Court held that the statutory language—particularly the use of the phrase “any period” in Sections 73 and 74—does not restrict the department to issuing year-wise notices. It reasoned that while GST returns and annual compliance obligations are structured around financial years, the adjudication mechanism under the Act is not similarly confined. The Court emphasized that reading a financial-year limitation into the statute would amount to adding words that the legislature deliberately omitted.
At the same time, the Court clarified that consolidation of periods into one notice does not dilute the statutory limitation requirements. The time limit for issuing demands must still be tested independently for each tax period included in the notice, and any time-barred portion would remain vulnerable to challenge. Accordingly, the Court allowed the Revenue’s appeals, restored the show cause notices, and aligned itself with other High Courts that have upheld consolidated GST notices.
2. Penalty under Section 122(1A) – Liability of Employees
Case: Amit Manilal Haria & Ors. v. Joint Commissioner of CGST & CE
The Hon’ble Bombay High Court examined whether penalty under Section 122(1A) could be imposed on employees of a company.
The department sought to impose penalty on employees alleging their involvement in fraudulent availment of input tax credit. The petitioners contended that they were merely employees and had not derived any personal benefit.
The Court held that penalty under Section 122(1A) cannot be imposed mechanically and requires establishment of active involvement in the contravention along with intent and benefit. It was further held that penal provisions must be strictly construed and cannot be applied retrospectively.
In absence of evidence demonstrating direct benefit or active role, imposition of penalty was held to be unsustainable.
3. Reversal of ITC Prior to SCN – Penalty Not Sustainable
Case: Manoja Kumar Nayak v. Commissioner of CT & GST
The Hon’ble Orissa High Court dealt with a situation where the taxpayer had reversed input tax credit prior to issuance of show cause notice.
The department, however, proceeded to initiate penalty proceedings under Section 74. The petitioner contended that once ITC had been reversed voluntarily and no tax liability remained, penalty proceedings were unwarranted.
The Court accepted this contention and held that in absence of any fraud, suppression or wilful misstatement, initiation of penalty proceedings would be unjustified.
The Court emphasised that voluntary compliance should not be discouraged by imposing penal consequences where no revenue loss exists.
4. Violation of Principles of Natural Justice in Adjudication
Case: M/s Srinidhi Construction v. Joint Commissioner
The Hon’ble Karnataka High Court examined the validity of an adjudication order passed under the GST law without granting adequate opportunity of hearing to the taxpayer. The petitioner contended that the impugned order had been passed in a mechanical manner without proper consideration of submissions and without affording a meaningful opportunity to present its case, thereby violating the principles of natural justice.
The department argued that sufficient opportunity had been provided in the course of proceedings and that the petitioner had failed to avail the same effectively. It was further contended that the order had been passed in accordance with the provisions of the CGST Act.
The Court, however, observed that adherence to principles of natural justice is a fundamental requirement in quasi-judicial proceedings. It was emphasised that mere issuance of notice is not sufficient; the taxpayer must be granted a reasonable and effective opportunity to respond, including the opportunity to present evidence and submissions. The Court noted that the adjudicating authority is required to pass a reasoned order after due consideration of the material placed on record.
In the facts of the present case, the Court found that the order had been passed without proper application of mind and without granting an effective opportunity of hearing. Accordingly, the impugned order was held to be unsustainable in law and was set aside. The matter was remanded to the adjudicating authority for fresh consideration in accordance with law, after providing adequate opportunity to the petitioner.
The ruling reiterates that compliance with principles of natural justice is not a mere procedural formality but a substantive requirement, and any deviation from the same renders the adjudication vulnerable to challenge.
5. GST Not Applicable on Damages for Breach of Contract
Case: Tata Sons Pvt. Ltd. v. Union of India (Docomo matter)
The Hon’ble Bombay High Court examined the taxability of amounts received by the petitioner pursuant to a settlement arising out of breach of contractual obligations in the well-known Docomo dispute. The issue before the Court was whether such payments could be treated as consideration for a “supply” under the GST regime, thereby attracting tax.
The department sought to levy GST by contending that the amount received was in the nature of consideration for tolerating an act or situation, falling within the scope of “supply” under Schedule II read with Section 7 of the CGST Act. It was argued that acceptance of compensation amounted to an agreement to tolerate the breach.
The petitioner, however contended that the payment was purely compensatory in nature, arising from breach of contractual obligations and did not involve any agreement to tolerate such breach. It was submitted that there was no independent or pre-existing arrangement whereby the petitioner agreed to tolerate an act for consideration.
The Court accepted the petitioner’s contention and held that compensation received for breach of contract does not constitute consideration for any supply of goods or services. It was observed that for a transaction to qualify as a taxable supply under GST, there must be a clear nexus between the payment and a contractual obligation to provide a service, including tolerating an act. In the present case, the payment was not for any such service, but was in the nature of damages awarded for non-performance of contractual obligations.
The Court further clarified that not every payment arising out of a contract can be treated as consideration for supply. A distinction must be drawn between payments made for performance of a contractual obligation and payments made as a consequence of breach of such obligation. The latter, being compensatory in nature, do not fall within the ambit of GST.
Accordingly, it was held that such damages are not liable to GST, reinforcing the principle that only genuine supplies involving quid pro quo are taxable and compensatory payments for breach do not qualify as consideration.
6. Taxability of Villa Construction Even if Outsourced (Karnataka AAR)
Assessee: M/s Varaha Land Private Limited
The Karnataka Authority for Advance Ruling examined whether a developer would be liable to GST where construction activity is outsourced to third-party contractors. The applicant contended that since construction was executed by contractors, GST liability should not arise in its hands. The Authority rejected this contention and held that the developer remains the person responsible for supplying the completed unit to the buyer.
It was observed that outsourcing does not alter the nature of supply and the developer continues to be the supplier of construction service. Accordingly, GST was held to be payable on such transactions.
7. Pure Labour Services for Residential Unit – Exemption Available(Karnataka AAR)
Assessee: M/s House Construct Infra
The Karnataka Authority for Advance Ruling considered whether labour-only contracts for construction of residential units qualify for exemption.
The Authority held that where services are provided purely in the nature of labour for construction of a single residential dwelling unit and no material is supplied, the benefit of exemption under Notification No. 12/2017 is available.
However, the Authority clarified that the exemption would not apply where the contract involves supply of both goods and services.
8. Rebate from Bank on Corporate Card Usage – Not Consideration (Karnataka AAR)
Assessee: M/s John Distilleries Pvt. Ltd
The Karnataka Authority for Advance Ruling examined the taxability of rebates received from banks on usage of corporate credit cards.
The Authority held that such rebates are in the nature of financial incentives and do not constitute consideration for any supply made by the applicant.
Accordingly, it was held that such amounts are not liable to GST.
