Key Judicial Pronouncements

Delhi High Court on Liability of Non-Executive Directors

In Ajit Gulabchand vs. Director General of Foreign Trade, the Delhi High Court ruled that an independent non-executive director cannot be held vicariously liable for a company’s failure to fulfil export obligations when specific allegations and procedural compliance are absent. The Court noted that the show-cause notices failed to establish any role of the petitioner in the alleged contraventions and thus set aside the penalty orders.

Karnataka High Court on Improper Blocking of ECL

In Safan Fasteners vs. Assistant Commissioner, the Karnataka High Court held that blocking the Electronic Credit Ledger (ECL) under Rule 86A of the CGST Rules without issuing a show-cause notice or conducting an independent inquiry violates principles of natural justice. The Court emphasized that such powers should not be used based on third-party defaults without proving a direct nexus.

Calcutta High Court on ITC Eligibility

In Niranjan Paul vs. SGST, the Calcutta High Court quashed the denial of Input Tax Credit (ITC) on the basis of retrospective cancellation of the supplier's registration. The Court directed a fresh evaluation, stressing that ITC eligibility should depend on the supplier's tax payment status and that necessary documents submitted by the taxpayer must be duly verified.

Policy and Regulatory Updates

Changes in Foreign Trade Policy

1. eBRC Format Enhancement for Service Exports

The Directorate General of Foreign Trade (DGFT) has introduced a new field, "Mode of Export of Services", in the electronic Bank Realisation Certificate (eBRC) format. Effective from 1 May 2025, this measure aligns India's reporting with WTO’s classification of services under GATS.
 

2.  Launch of DGFT Global Tariff and Trade Helpdesk

A dedicated helpdesk has been established to assist exporters and importers with tariff-related queries, market access conditions, and regulatory compliance. This is part of DGFT’s initiative to improve transparency and ease of doing business.

3. Expansion of MEIS Coverage
DGFT has expanded the Merchandise Exports from India Scheme (MEIS) by including new products under specified HS codes. Exporters can now avail of additional duty credit benefits, enhancing their global competitiveness.

4. India-Maldives Bilateral Agreement for FY 2025-26

DGFT Notification No. 1/2025-26 permits export of essential commodities to the Maldives with exemptions from prohibitions or restrictions under the bilateral agreement for FY 2025-26.
5. Amendments to Import Policy

• Synthetic Knitted Fabrics: Imports under specified HS codes are now ‘Restricted’ unless the CIF value is USD 3.5/kg or above.

• Coal Imports (Chapter 27): The CIMS registration fee will be governed by Appendix 2K of the FTP.

• LCS Darranga: Now designated as an authorized Food Import Entry Point.

Important GST Developments

GSTAT Procedures and Rules 2025

The GST Appellate Tribunal (GSTAT) Procedure Rules, 2025, effective from 24 April 2025, have laid out a comprehensive framework for appeal filings, including:

• Filing appeals through the GSTAT portal using prescribed forms.
   

• Specific document and fee requirements.
   

• Electronic handling of cases, communications, and rectification processes.
   

• Structured hearing and order pronouncement protocols.

These rules ensure clarity in process, timely disposal of appeals, and alignment with natural justice principles.

Revised Guidelines for GST Registration

CBIC has revised instructions for processing GST registration applications, emphasizing consistency, faster approval for low-risk applications, and detailed document requirements based on ownership or lease of premises. Special provisions have been included for SEZs, partnerships, and statutory bodies to streamline registration.

Reporting Updates in GSTR Forms

1. Table 3.2 of GSTR-3B: Values will now be auto-populated based on data from GSTR-1, GSTR-1A, and IFF. Any changes must be reflected in these returns.

2. HSN Reporting in GSTR-1: From April 2025, HSN codes must be selected from a predefined dropdown. Manual entries will no longer be accepted.

Conclusion

May 2025 has seen a significant evolution in both adjudicatory and policy frameworks related to indirect taxation in India. These developments reinforce the need for businesses to stay updated on procedural requirements and ensure due compliance to mitigate risks. At TwoTax, we remain committed to helping our clients navigate the dynamic GST and foreign trade environment with clarity and confidence.

For our Indirect Tax services click on the link - https://www.twotax.in/sub-service/indirect-tax-services