GST Business Protection Series – Part 2 Building a GST Risk-Proof Business Framework

 By CA Surekha S. Ahuja

From Vendor Selection to Litigation Protection - Turning GST Compliance into a Strategic Business Governance System

“The costliest mistake in business is not always a wrong decision; sometimes it is a right decision taken without a proper system of protection.”

The evolution of GST has changed the way businesses must look at compliance.

Earlier, GST compliance was largely considered a responsibility of the tax department — preparing returns, reconciling data and responding to notices. However, the changing judicial environment, especially the interpretation of Section 16(2)(c) of the CGST Act, has created a new business reality.

A genuine transaction supported by an invoice, payment proof and receipt of goods or services may still face challenges if the supply chain partner does not maintain proper GST compliance.

The message for businesses is clear: GST compliance is no longer only a tax function. It has become a business protection function.

Businesses must now move from: Vendor Compliance to Vendor Governance

GST Filing to GST Risk Management -  Transaction Recording to Transaction Protection

Your Vendor Is Now a Part of Your GST Risk Management Framework

Traditionally, businesses focused on: ✔ Purchase order, ✔ Invoice verification, ✔ Receipt of goods or services, ✔ Payment to vendor

However, GST risk management requires a wider approach.

A vendor is not merely a supplier of goods or services.

A vendor is a compliance partner whose actions can impact your Input Tax Credit and business continuity.

Therefore, vendor selection should not be based only on price and commercial terms.

It should also consider:

• GST compliance discipline
• Business credibility
• Filing behaviour
• Tax payment history
• Ability to provide supporting documentation

From Vendor Verification to Vendor Governance

A strong GST protection framework begins before the first transaction.

Businesses should establish a structured vendor governance process:

Area	Recommended Business Practice
Vendor onboarding	Verify GST registration, PAN, business credentials and basic compliance history
Contract stage	Include GST compliance responsibilities and indemnity clauses
Purchase stage	Ensure proper invoices and supporting documents
Monthly monitoring	Review ITC availability and vendor compliance status
Payment process	Link vendor payments with compliance risk review
Risk classification	Identify critical and high-risk vendors

The objective is simple:  Prevent GST disputes before they arise.

GST Due Diligence Before Entering Into Business Relationships

One of the biggest mistakes businesses make is reviewing vendors only after receiving a GST notice.

A proactive organisation follows:

Prevention before Litigation

Important checks may include:

✔ Valid GST registration
✔ Filing regularity
✔ Business existence
✔ Nature of business activity
✔ Consistency between supplies and returns
✔ Past compliance concerns

A few minutes of due diligence at the beginning can protect years of business operations.

GST Protection Through Strong Agreements

Many businesses have detailed commercial agreements but ignore GST protection clauses.

Vendor agreements should clearly provide:

• Responsibility for GST compliance
• Timely filing of GST returns
• Cooperation during departmental proceedings
• Protection of Input Tax Credit
• Indemnity for losses arising due to vendor default

A purchase order should not only answer: “What will be supplied?”

It should also answer: “How will GST risk arising from this transaction be protected?”

Technology: The Future of GST Risk Management

With increasing transaction volumes, manual monitoring is no longer sufficient.

Businesses should develop technology-based GST controls such as:

• Automated ITC reconciliation
• Vendor compliance dashboards
• Exception reporting
• Risk-based vendor classification
• Early warning systems

The future of GST compliance will be driven by:  Data + Technology + Governance

GST Risk Is a Management Responsibility

GST exposure is no longer limited to the tax team.

For businesses with significant transactions, GST risk should become a part of internal governance.

Management should periodically review:

• Major Input Tax Credit exposure
• Vendor concentration risk
• Pending GST disputes
• High-risk suppliers
• Compliance gaps

A strong organisation does not wait for a notice. It builds systems that reduce the possibility of receiving one.

Documentation: The Strongest Defence in GST Litigation

In GST proceedings, the strongest defence is not merely:

“We acted honestly.”  The stronger defence is:  “We followed a documented and reasonable business process.”

Businesses should preserve:

✔ Purchase orders
✔ Agreements
✔ Tax invoices
✔ Delivery records
✔ Payment proofs
✔ Vendor communications
✔ Compliance review records

A properly documented transaction is a protected transaction.

The GST Business Protection Checklist

Every business should periodically evaluate:

Question	Status
Do we verify vendors before onboarding?	Yes / No
Do our agreements contain GST protection clauses?	Yes / No
Do we monitor vendor compliance regularly?	Yes / No
Do we maintain complete ITC documentation?	Yes / No
Are GST risks reported to management?	Yes / No

Conclusion

The GST journey has moved beyond calculation of tax liability.

The new question for every business is:  “How effectively can we protect our business from GST risk?”

The successful businesses of tomorrow will not only be those who comply with GST provisions.

They will be those who create:  A culture of compliance, A system of governance, And a framework of protection.

GST compliance is no longer a back-office activity. It is a strategic business protection mechanism. 

“A business is not protected merely because it follows the law; it is protected when it builds systems that prove its commitment to compliance.”

Supreme Court Section 16(2)(c) GST Judgment: Why Every Business Needs a Vendor Governance Framework

The GST Business Protection Series – Part 1- From GST Compliance to Vendor Governance

Turning a Supreme Court Judgment into a Business Protection Framework

By CA Surekha S Ahuja

The Supreme Court has settled the law. Now businesses must strengthen the systems behind every purchase.

“Every invoice carries a tax consequence. But every vendor carries a business risk.”

The Biggest GST Risk May Enter Before the Invoice Does

Businesses have invested significantly in strengthening:

✓ Statutory audit systems
✓ Financial reporting controls
✓ ERP processes
✓ Tax compliance mechanisms
✓ Internal audit frameworks

However, one critical area often remains under-governed:

The Vendor Ecosystem

Every vendor brings more than goods or services.

A vendor also brings:

• GST compliance risk
• Financial risk
• Operational risk
• Regulatory exposure
• Reputation risk

The recent judgment of the Supreme Court of India upholding Section 16(2)(c) of the CGST Act, 2017 has highlighted a fundamental business reality:

ITC protection does not begin in the GST return. It begins when the vendor is selected.

The Supreme Court Message: ITC Is Now a Supply Chain Responsibility

The controversy around Section 16(2)(c) revolved around a critical question:

Should a genuine buyer suffer when a supplier fails to discharge GST obligations?

The Supreme Court has upheld the statutory framework under which Input Tax Credit remains subject to fulfilment of prescribed conditions, including the requirement relating to payment of tax by the supplier to the Government.

The practical business message is clear:

A company cannot evaluate vendors only on:

• Price
• Quality
• Delivery capability

It must also evaluate:

• Compliance behaviour
• Filing discipline
• Financial credibility
• Regulatory history

The question for businesses is no longer:

❌ “How do we defend ITC after receiving a notice?”

The right question is:

✅ “How do we prevent the wrong vendor from creating an ITC dispute?”

From Vendor Management to Vendor Governance

Traditional approach:

Find Vendor → Negotiate Price → Receive Invoice → Claim ITC

The new approach:

Verify Vendor → Assess Risk → Approve Vendor → Monitor Compliance → Protect ITC

The Supreme Court judgment has effectively moved vendor compliance:

From the back office to the boardroom — making supplier governance a matter of corporate risk management.

The Vendor Risk Transfer Principle™

Every business believes it purchases:

• Goods
• Services
• Quality
• Delivery

But every vendor also brings:

• Tax behaviour
• Compliance history
• Financial strength
• Regulatory exposure
• Business reputation

Therefore:

A purchase order is not merely a commercial document. It is an acceptance of business risk.

Introducing the Vendor Governance Framework™

Vendor management is no longer enough.

Businesses need a structured:

Vendor Governance Framework

covering the complete vendor lifecycle:

Vendor Due Diligence
↓
Vendor Approval
↓
Risk Classification
↓
Contract Protection
↓
Purchase Controls
↓
Invoice Verification
↓
Payment Controls
↓
Vendor Audit
↓
Continuous Monitoring

The objective is not merely to create a vendor master.

The objective is:

To create a trusted business ecosystem.

The Purchase Protection Principle™

A simple but powerful principle:

“Every invoice reaches Accounts much later than the vendor enters the organisation. Therefore, the first line of ITC protection is Procurement — not Accounts.”

By the time Finance receives an invoice:

• Vendor selection is complete.
• Commercial commitments are already made.
• Business risk has already entered.

Therefore: 

Prevention must begin before procurement approval.

The Vendor Firewall™

Modern organisations already have:

✓ Cyber Firewall
✓ Data Firewall
✓ Financial Controls

But today's businesses need another protection layer:

Vendor Firewall

Nothing should enter the organisation without verification.

The Three Lines of Defence for Vendor Governance

Defence	Key Responsibility
Procurement	Vendor selection, due diligence and approval
Finance & Tax	GST verification, ITC monitoring and reconciliation
Internal Audit	Independent testing and vendor audit

A strong control environment requires all three functions to work together.

Why Vendor Audit Must Become a Business Necessity

Most organisations conduct:

✓ Statutory Audit
✓ Tax Audit
✓ Internal Audit

But an important question remains:

Who audits the parties creating the purchase liabilities?

Vendor audit is not a replacement for statutory audit.

It is a preventive control that strengthens the foundation on which financial statements and tax positions are built.

Vendor audit provides assurance over:

GST & Tax Controls - ✓ ITC mismatch risks - ✓ Supplier compliance behaviour - ✓ Invoice authenticity - ✓ E-invoice compliance

Financial Controls - ✓ Duplicate payments -✓ Unauthorised vendors -✓ Billing accuracy

Business Controls - ✓ Supplier capability - ✓ Operational continuity - ✓ Documentation discipline

The New Corporate Mantra

Old Thinking	New Thinking
Lowest Price Vendor	Lowest Risk Vendor
Vendor Registration	Vendor Governance
Claim ITC	Protect ITC
Compliance After Purchase	Compliance Before Procurement

Conclusion

The Supreme Court Has Settled the Law. Businesses Must Now Strengthen Their Systems.

The Section 16(2)(c) judgment is not merely a GST development.

It is a reminder that modern businesses must govern their entire supply chain.

The future belongs to organisations that understand:

Every purchase decision is a tax decision.
Every vendor decision is a risk decision.
Every invoice is a governance decision.

The strongest organisations will not be those that fight GST disputes better.

They will be those that build systems where disputes are prevented before they arise.

A robust Vendor Governance Framework will help businesses:

✓ Protect Input Tax Credit
✓ Reduce litigation exposure
✓ Strengthen procurement discipline
✓ Improve internal controls
✓ Protect cash flows
✓ Enhance audit readiness

The Supreme Court has settled the law. Now every business must settle its vendor governance.

Coming Next: Part 2

The Ultimate Vendor Audit & Purchase Governance SOP

100+ Practical Controls to Protect Every Rupee of Input Tax Credit

Part 2 will cover:

✓ Vendor Due Diligence Checklist
✓ Vendor Risk Rating Matrix
✓ GST Verification Framework
✓ GSTR-2B Reconciliation SOP
✓ Purchase Approval Controls
✓ Payment Release Controls
✓ CFO Dashboard
✓ Board Reporting Format
✓ Exception Management System
✓ 30-Day Implementation Roadmap

Benami Property Notice Received? Complete Defence Guide for Taxpayers

Transactions Before & After 25 October 2016 | Section 2(9) Analysis, Winning Arguments, Evidence Strategy & Supreme Court Position

By CA Surekha Ahuja

“A Benami allegation cannot succeed merely because one person paid the money and another person holds the property. The law does not punish financial assistance, family arrangements or genuine ownership structures; it targets only concealed beneficial ownership.”

Benami Proceedings: The Real Legal Test Every Taxpayer Must Understand

The Prohibition of Benami Property Transactions Act, 1988 is one of the most stringent laws dealing with alleged undisclosed ownership structures.

Proceedings under the Act may result in:

• Provisional attachment of property;
• Adjudication proceedings;
• Confiscation of property;
• Penalty;
• Prosecution.

However, such consequences cannot arise merely because:

• one person has provided funds;
• property stands in another person's name;
• parties are relatives;
• the registered owner has comparatively lower income.

The department must establish that the transaction satisfies the statutory definition of a “Benami transaction” under Section 2(9).

The Fundamental Principle: Source of Money Is Different From Beneficial Ownership

A common misconception is:

“The person who paid the money must be the real owner.”

This approach is legally incomplete.

Source of Consideration	Beneficial Ownership
Who provided money	Who enjoys the real benefit
Financial contribution	Actual ownership interest
Payment trail	Control and enjoyment

A financial trail may justify an inquiry, but it cannot by itself establish Benami ownership.

1. Transactions Before 25 October 2016 — Retrospectivity Defence

The date 25 October 2016 / 1 November 2016 is an important dividing line in Benami litigation.

For pre-amendment transactions, the taxpayer's defence is that enhanced confiscatory and penal consequences introduced by the amendment cannot retrospectively create liability.

Article 20(1) Constitutional Protection

A person cannot be punished for an act which was not an offence under the law applicable at the time of commission.

Defence Argument:

“A subsequent penal and confiscatory regime cannot retrospectively create liability for a completed transaction.”

2. Supreme Court Position — Ganpati Dealcom

Union of India v. M/s Ganpati Dealcom Pvt. Ltd.
(2022) 10 SCC 127; 2022 INSC 853

The Supreme Court had held that amended Benami provisions could not operate retrospectively.

However, the judgment was recalled by the Supreme Court in:

Review Petition (Civil) No. 359/2023 in Civil Appeal No. 5783/2022 — 2024 INSC 799

The issue is presently pending fresh consideration before the Supreme Court.

Therefore, the retrospectivity argument remains a strong defence argument but must be presented with disclosure of the recall order.

3. Transactions On or After 25 October 2016 — Defence Under Section 2(9)

For post-amendment transactions, the primary defence is:

The department has failed to establish the mandatory ingredients of Section 2(9).

Defence 1: Mere Payment of Consideration Does Not Establish Benami Ownership

Section 2(9)(A) requires not merely payment by one person and ownership in another's name, but also that the property is held for the benefit of the person providing consideration.

The critical test is:

Who enjoys the beneficial ownership?

Winning Argument:

“The department has proved only the movement of funds. It has not proved that the registered owner is merely a name-lender or that another person enjoys the beneficial interest.”

Defence 2: Genuine Family Transactions Are Not Automatically Benami

Family arrangements involving:

• spouse;
• children;
• HUF;
• fiduciary relationships;

cannot automatically be treated as Benami where ownership is genuine and sources are explainable.

Winning Argument:

“The Benami Act targets concealed ownership structures, not genuine family arrangements supported by documentary evidence.”

Defence 3: Known Source of Funds Is Critical

Important supporting documents:

Evidence	Purpose
Income-tax Returns	Financial capacity
Bank Statements	Fund trail
Loan Documents	Legitimate source
Capital Accounts	Accumulated funds
Gift Records	Genuine transfer

Defence 4: Cash Deposits Alone Cannot Prove Benami

Cash deposit may raise an Income-tax issue, but Benami proceedings require proof of:

Money source → Property investment → Hidden beneficial owner → Enjoyment of benefit

Winning Argument:

“An unexplained income issue and a Benami ownership issue are separate legal questions.”

Defence 5: Challenge Mechanical Proceedings Under Section 24

Proceedings require:

• tangible material;
• valid reason to believe;
• independent application of mind.

They cannot be based merely on:

• suspicion;
• relationship;
• income comparison;
• assumptions.

Judicial Principles — R. Rajagopal Reddy

R. Rajagopal Reddy v. Padmini Chandrasekharan
(1996) 2 SCC 225; AIR 1996 SC 238

The Supreme Court recognised that Benami determination requires examination of:

• source of consideration;
• motive;
• relationship;
• possession;
• conduct;
• custody of title documents.

Practical Defence Checklist

Ownership Evidence

✔ Sale deed
✔ Possession records
✔ Property tax records

Financial Evidence

✔ Bank statements
✔ Income-tax returns
✔ Loan documents

Conduct Evidence

✔ Rental records
✔ Maintenance payments
✔ Property correspondence

Final Professional Takeaway

A successful Benami defence is not merely:

❌ “The transaction is genuine.”

The stronger legal position is:

✅ “The department has failed to prove the statutory ingredients of Section 2(9). Payment of consideration alone does not establish beneficial ownership. Without proof of concealed ownership, Benami proceedings cannot survive.”

Key Judicial Authorities

Case	Citation	Principle
Union of India v. M/s Ganpati Dealcom Pvt. Ltd.	(2022) 10 SCC 127; 2024 INSC 799	Retrospectivity issue pending fresh consideration
R. Rajagopal Reddy v. Padmini Chandrasekharan	(1996) 2 SCC 225	Benami determination requires surrounding circumstances
Rajesh Katyal v. Income Tax Department	(2023) 451 ITR 455	Pre-amendment transaction principles
Niharika Jain v. Union of India	Rajasthan HC, 2019	Prospective operation of substantive provisions

Missed 31 July 2026 ITR Filing Deadline? Can Business Income or Partnership Status Legally Extend Your Due Date

 By CA Surekha Ahuja

“Under tax law, the due date is not a matter of convenience or choice. It is a consequence of the taxpayer’s actual facts, income character and statutory conditions.”

The 31 July 2026 deadline for filing Income Tax Returns for Assessment Year 2026–27 has passed.

After missing the due date, many taxpayers are exploring whether they can legally fall under a different filing category by:

• Reporting business income;
• Starting or showing business activity;
• Becoming a partner in a partnership firm;
• Selecting a different ITR form.

This requires a careful understanding of the law.

The issue is not:

“How can the due date be extended?”

The correct question is:

“Based on the facts existing during the relevant financial year, what due date applies under the Income-tax Act?”

The Golden Principle: Due Date Follows Facts, Not Strategy

The due date under Section 139(1) of the Income-tax Act, 1961 is determined by the statutory conditions applicable to the taxpayer.

The relevant factors include:

• Nature of income;
• Whether business or profession is genuinely carried on;
• Applicability of tax audit provisions under Section 44AB;
• Applicable return form and legal category.

A taxpayer cannot first select a preferred due date and then modify income classification to achieve that result.

The correct sequence is:  Actual Facts → Correct Income Classification → Applicable Law → Filing Due Date

Can Business Income Without Audit Provide a Different Filing Timeline

A taxpayer may genuinely have business or professional income without being liable for tax audit under Section 44AB.

Examples may include:

• Small business activities;
• Professional services;
• Eligible presumptive taxation cases.

However, a very important clarification:

Mere existence of business income does not automatically provide an extended filing deadline.

The taxpayer must establish that:

• A real business or profession existed during FY 2025–26;
• Income was genuinely taxable under the head “Profits and Gains of Business or Profession”;
• The applicable conditions under Section 139(1) are satisfied.

Business income is a commercial reality, not a return filing arrangement.

What Establishes Genuine Business Activity

A professional evaluation would consider:

Parameter	What Should Exist
Business purpose	Real commercial intention
Activity	Actual operations carried out
Revenue	Genuine customers/sales/professional receipts
Documentation	Agreements, invoices, contracts and records
Financial trail	Banking and accounting evidence
Consistency	Alignment with GST, TDS, AIS and other disclosures

A token entry of business income without underlying activity may not create a legally sustainable position.

Partnership Firm: The Most Misunderstood Area

Becoming a partner in a partnership firm requires separate analysis. Under the Income-tax Act:

(a) Share of Profit from Firm

The partner’s share of profit is exempt under:  Section 10(2A)

It is not taxable business income in the hands of the partner.

(b) Remuneration, Interest or Other Payments

Amounts received by a partner, including:

• Salary/remuneration;
• Bonus;
• Commission;
• Interest on capital,

are taxable as business income under: Section 28(v) subject to the conditions of Section 40(b).

Partner Without Remuneration or Interest — Key Legal Position

If an individual:

• Becomes a partner;
• Does not receive remuneration;
• Does not receive interest;
• Receives only share of profit,

then mere partnership status does not automatically create taxable business income in the individual’s hands. The important distinction is:

Being a partner in a firm is not always the same as personally carrying on a business.

The facts must determine the tax treatment.

Can a Partnership Be Created After the Due Date to Obtain More Time

This is the most critical caution point.

The relevant facts are those existing during the previous year relevant to AY 2026–27.

A partnership created after 31 July 2026 cannot ordinarily rewrite the taxpayer’s income character for FY 2025–26.

A genuine partnership requires:

✅ Valid partnership agreement
✅ Genuine business purpose
✅ Commercial substance
✅ Intention to carry on business
✅ Real participation and relationship between partners

A partnership created only to obtain a filing advantage may invite examination regarding:

• Commercial rationale;
• Timing;
• Substance of transactions;
• Supporting evidence.

Tax Planning vs Creating a Compliance Advantage

Legitimate Tax Planning

✔ Structuring genuine business activities properly
✔ Entering into genuine partnerships
✔ Maintaining documentation
✔ Claiming benefits provided by law

Not Legally Sustainable

❌ Creating artificial business income
❌ Introducing a partnership without commercial purpose
❌ Selecting ITR form only to obtain additional time
❌ Making disclosures inconsistent with actual transactions

Tax law respects genuine arrangements but does not support arrangements created only for procedural benefits.

Professional Checklist Before Taking Any Position

Before relying on business income or partnership status, evaluate:

Question	Why It Matters
Did business/profession actually exist during FY 2025–26?	Determines income character
Was taxable business income earned?	Determines applicability of provisions
Was the partnership existing during the relevant year?	Determines legal relevance
Was remuneration/interest received?	Determines Section 28(v) impact
Are supporting records available?	Determines defensibility

Correct Course of Action After Missing 31 July 2026

The professional approach is:

Step 1 — Review the actual facts  Identify all sources and nature of income.

Step 2 — Determine the correct legal category Do not decide the ITR form first.

Step 3 — Compute consequences Consider: Late filing fee under Section 234F; Applicable interest; Impact on loss carry forward; Refund implications.

Step 4 — File a correct and defensible return

Final Professional View

A genuine business activity or genuine partnership arrangement has full recognition under tax law.

However:  Business income cannot be introduced merely to obtain additional time for filing an ITR.

A partnership cannot be used as a post-deadline mechanism to alter compliance obligations.

The principle is simple: “The due date follows genuine facts. Genuine facts cannot be created to follow a desired due date.”

CBIC to Issue Framework for Departmental GST Appeals in Multi-State Cases: Greater Clarity, Uniformity and Reduced Procedural Litigation

 By CA Surekha S. Ahuja

The Central Board of Indirect Taxes and Customs (CBIC) is expected to issue a comprehensive circular to streamline the filing of departmental appeals before the Goods and Services Tax Appellate Tribunal (GSTAT) in cases involving taxpayers registered in multiple States.

The proposed framework addresses an important procedural gap that surfaced after GSTAT became operational.

Background

In major investigations by the Directorate General of GST Intelligence (DGGI)—including cases involving fake Input Tax Credit (ITC), circular trading, invoice fraud, and other pan-India GST investigations—a Common Adjudicating Authority often passes a single adjudication order covering taxpayers registered in different States.

Although Section 107 of the CGST Act governs the first appellate stage and Section 112 provides for appeals before GSTAT, there has been uncertainty regarding:

• Which Commissioner should decide whether the Department should file an appeal?
• Which GSTAT Bench should hear the departmental appeal where multiple States are involved?

Proposed CBIC Framework

The forthcoming circular is expected to clarify that:

• Adjudication will continue to remain centralised through the Common Adjudicating Authority.
• After an order under Section 107 is passed, the appellate order will be uploaded on the GST portal and communicated to the Commissioner supervising the Common Adjudicating Authority.
• The Commissioner will examine the order, obtain DGGI comments wherever necessary, and forward recommendations to the jurisdictional Commissioners of all affected taxpayers.
• Each jurisdictional Commissioner will independently decide whether to file a departmental appeal under Section 112 before the GSTAT Bench having territorial jurisdiction over that taxpayer's registration.

This eliminates uncertainty regarding routing of departmental appeals through the Commissionerate supervising the Common Adjudicating Authority.
Why This Matters

The proposed framework is expected to:

• Bring uniformity in departmental appellate procedures across India.
• Reduce jurisdictional disputes and technical objections relating to departmental appeals.
• Ensure appeals are filed before the correct GSTAT Bench.
• Improve coordination in DGGI-led multi-State investigations.
• Provide greater certainty to businesses operating through multiple GST registrations.
• Strengthen procedural efficiency without disturbing centralised adjudication.

Practical Impact on Multi-State Businesses

Large business groups, manufacturers, e-commerce operators, logistics companies, and enterprises having GST registrations across several States are likely to benefit from a clear, predictable and jurisdiction-based appellate mechanism. Instead of uncertainty over the competent authority for departmental appeals, each registration will now be dealt with by its own jurisdictional Commissioner, while maintaining coordinated administration at the adjudication stage.

Key Takeaway

The proposed CBIC circular is a welcome administrative reform that aligns centralised adjudication with decentralised appellate decision-making. While it does not alter the substantive provisions of the CGST Act, it is expected to significantly reduce procedural ambiguity, improve litigation management, and promote a more efficient and consistent GST appellate process across India.

Can an Employer Give Credit for TDS Deducted on Sale of Property While Computing Salary TDS

Why the Answer Is an Unequivocal 'No' – A Statutory Interpretation Under the Income-tax Act.

By CA Surekha S. Ahuja

"A deductor can deduct tax only in the manner authorised by law. He cannot grant tax credit unless the statute expressly empowers him to do so."

A question frequently raised by employees and payroll teams is:

"The purchaser has already deducted TDS on my sale of immovable property. Can my employer reduce or adjust the TDS deductible from my salary?"

The legal answer is an unequivocal No.

The issue is not whether sufficient tax has already been deducted. The real question is whether the employer has statutory authority to recognise or adjust TDS deducted under another provision of the Income-tax Act while computing salary TDS.

The Income-tax Act, 2025 confers no such authority.

The Statutory Scheme Leaves No Scope for Adjustment

The Income-tax Act establishes independent statutory mechanisms for deduction of tax from different categories of income.

• Salary TDS is deducted by the employer on estimated taxable salary.
• TDS on sale of immovable property is deducted by the purchaser under a separate statutory provision.
• Credit for all eligible TDS is ultimately granted by the Income-tax Department after determining the taxpayer's total income and tax liability.

These are three distinct statutory functions entrusted to three different persons.

The Legislature has deliberately separated:

• deduction of tax,
• deposit of tax,
• grant of tax credit, and
• assessment of tax liability.

An employer performs only one of these functions—deduction of tax from salary.

He is not authorised to perform the others.

An Employer Cannot Exercise Powers Not Granted by the Statute

A fundamental principle of tax jurisprudence is that statutory powers must be expressly conferred.

A tax deductor is a creature of the statute. He cannot assume powers merely because they appear equitable or administratively convenient.

If Parliament intended an employer to adjust TDS deducted on property transactions against salary TDS, it would have expressly provided so.

The absence of such a provision is not an omission—it is a conscious legislative design.

Why This Function Belongs Only to the Income-tax Department

Permitting an employer to adjust property-related TDS would require the employer to determine questions such as:

• Has any taxable capital gain actually arisen?
• Is the gain exempt?
• Has the employee claimed rollover relief?
• Has the purchaser correctly deposited the TDS?
• Does the credit belong to the employee?
• What is the employee's final tax liability after considering all sources of income?

These are assessment functions, not payroll functions.

The employer has neither the statutory jurisdiction nor the factual machinery to decide them.

That responsibility rests exclusively with the Income-tax Department while processing the return of income.

Judicial Principles Support This Interpretation

The statutory framework is reinforced by settled legal principles:

• TDS provisions are mandatory machinery provisions and must be implemented strictly in accordance with the Act.
• An employer's responsibility is confined to correctly deducting tax from salary in accordance with the statutory provisions governing salary TDS.
• Grant of TDS credit is part of the assessment process and cannot be undertaken by a deductor.
• Administrative convenience or employee consent cannot enlarge statutory powers.

These principles are reflected in the jurisprudence of the Supreme Court, including decisions such as Eli Lilly, Transmission Corporation, and Hindustan Coca Cola, as well as CBDT guidance governing salary TDS.

Consequences of an Incorrect Adjustment

If an employer reduces salary TDS by considering TDS deducted on sale of property without statutory authority, the consequences may include:

• short deduction of salary TDS;
• proceedings treating the employer as an assessee in default, subject to statutory relief where applicable;
• interest liability under the TDS provisions;
• penalty proceedings, where attracted under the Act;
• payroll audit qualifications, departmental scrutiny and avoidable litigation.

An employee's declaration or request cannot validate an adjustment which the statute itself does not permit.

The Correct Compliance Approach

The law contemplates a simple and orderly process:

Employer  Deduct TDS only on estimated taxable salary.

Employee Claim credit for TDS deducted on sale of property while filing the return of income.

Income-tax Department

• Verify all TDS credits, compute the total tax liability and grant refund or raise demand, as the case may be.

Each stakeholder performs the function assigned by the statute—nothing more and nothing less.

Conclusion

The controversy is often viewed as a question of tax already paid.

Legally, it is a question of statutory authority.

The Income-tax Act does not authorise an employer to grant credit for TDS deducted on sale of immovable property while computing salary TDS.

The employer deducts tax. The purchaser deducts tax. The Income-tax Department grants tax credit.

No deductor can assume the statutory functions of another.

That is not merely a procedural requirement—it is the very architecture of the Income-tax Act.

Payroll is a mechanism for collection of tax. Assessment and grant of TDS credit remain the exclusive domain of the Income-tax Department

Revised Form 16 & TDS Return Correction: Employer Payroll Risks and Compliance Guide

 By CA Surekha S. Ahuja

Food Coupons, NPS Contribution, Reimbursements, Perquisites & Retrospective Salary Changes — A Complete Governance Guide for HR, CFOs and Payroll Teams

A revised Form 16 is not merely an employee service request. It is a revised statutory statement by the employer and must be supported by law, facts, documentation and a proper audit trail.

The Emerging Payroll Compliance Challenge

Employee awareness about tax-efficient compensation has increased significantly.

Employers are also rightly focused on providing competitive and employee-friendly compensation structures through legitimate benefits such as:

• Food coupons and meal benefits;
• Employer contribution to NPS under Section 80CCD(2);
• Retirement benefits;
• Reimbursements;
• Allowances;
• Perquisites; and
• Other employee welfare benefits.

However, a new payroll governance challenge is increasingly emerging.

After the end of the financial year, employees may approach HR and payroll teams requesting:

• Revision of TDS returns;
• Change in taxable salary computation;
• Revised Form 16;
• Retrospective tax benefit adjustments.

In some cases, HR teams may also consider such changes with the objective of supporting employees.

The issue is not whether payroll records can ever be corrected.

They can.

The critical question is:

Is the employer correcting a genuine payroll error or retrospectively changing salary records to create a tax benefit?

The Golden Principle of Payroll Governance

Design correctly. Process correctly. Report correctly.

The employer's responsibility under the Income-tax law is to determine and report the correct taxable salary based on:

• Applicable legal provisions;
• Employee eligibility;
• Actual facts;
• Supporting documents; and
• Proper payroll records.

The objective is neither to maximise nor minimise employee tax.

The objective is:

Accurate, consistent and defensible tax reporting.

Why Revised Form 16 and TDS Corrections Require Caution

Form 16 and TDS statements are statutory records reflecting:

• Salary paid;
• Taxable salary computed;
• Tax deducted at source; and
• Tax treatment adopted by the employer.

Therefore, every revision should be capable of answering:

1. Was the original computation actually incorrect?

2. Does the revised treatment have legal support?

3. Are adequate records and evidence available?

4. Can the employer defend the position during audit, verification or scrutiny?

A revised Form 16 is effectively a fresh statutory representation by the employer.

When Revision Is Appropriate

Correction of payroll, TDS returns or Form 16 may be justified where:

✓ Payroll software incorrectly calculated salary.

✓ There was a genuine clerical or processing mistake.

✓ An applicable tax provision was incorrectly applied.

✓ An eligible benefit was omitted despite fulfilment of conditions.

✓ Supporting records establish the correct treatment.

Such corrections improve accuracy and compliance.

Situations Requiring Greater Caution

Employers should undertake detailed review where:

❌ Changes are requested only after employees discover a tax advantage.

❌ Salary components are reclassified after year-end.

❌ Taxable salary is converted into reimbursement without original policy support.

❌ Benefits are introduced without contemporaneous documentation.

❌ Payroll entries are modified without corresponding actual transactions.

❌ Only selected employees receive retrospective adjustments.

❌ HR changes tax treatment without Finance/Tax evaluation.

Food Coupons: The Current Trigger

Food coupons/meal benefits are one of the most discussed payroll issues.

Where eligible conditions are satisfied, employer-provided meal benefits are considered through salary computation and applicable perquisite valuation provisions, including Rule 3 of the Income-tax Rules.

The correct approach is:

Employee policy → Eligibility verification → Payroll processing → Correct TDS deduction → Accurate Form 16 reporting

The benefit should ideally be structured and processed during the year.

It should not become a year-end mechanism to reopen completed payroll without examining eligibility, records and applicable conditions.

Other Payroll Areas Requiring Strong Controls

1. Employer NPS Contribution — Section 80CCD(2)

Employer NPS contribution can be a valuable retirement benefit.

However, employers must ensure:

• Actual contribution has been made;
• Employee-wise records are maintained;
• Applicable limits are monitored;
• Reporting matches actual contribution.

A tax benefit should arise from genuine compensation design and actual transactions, not retrospective payroll modifications.

2. Employer Retirement Contributions Above ₹7.5 Lakh

Employer contributions to recognised provident fund, NPS and approved superannuation fund require careful employee-wise tracking.

Employers should maintain:

• Correct calculations;
• Proper valuation;
• Accurate reporting;
• Reconciliation with actual contributions.

Retrospective adjustments merely to alter tax consequences can create unnecessary compliance risk.

3. Reimbursements and Allowances

Employee welfare benefits and reimbursements can form an important part of compensation design.

However, tax treatment should follow the substance of the transaction.

Employers should verify:

• Existence of policy;
• Genuine purpose;
• Actual expenditure;
• Supporting documents;
• Consistent application.

A change in description alone does not change the tax character.

Employer Risk Analysis

Area	Compliance Concern
Revised Form 16 without adequate basis	Incorrect statutory reporting
TDS correction without genuine error	Possible departmental scrutiny
Retrospective salary restructuring	Re-characterisation risk
Unsupported benefits	Difficulty defending treatment
Selective corrections	Governance and fairness concerns
Missing audit trail	Weak internal controls

Employee Perspective: Rights Along With Responsibility

Employees should receive every legitimate benefit available under law.

At the same time, employees should understand:

• A revised Form 16 does not automatically establish eligibility.
• Tax benefits depend on facts, conditions and documentation.
• The employee remains responsible for filing a correct Income-tax Return.
• Unsupported claims may lead to future clarification or tax consequences.

Employees should seek correction of genuine errors, while employers should ensure that corrections are legally sustainable.

The Ideal Payroll Governance Framework

Before the Financial Year

✓ Design employee-friendly and tax-efficient salary structures.

✓ Clearly communicate available benefits.

✓ Define documentation requirements.

During the Financial Year

✓ Process payroll accurately.

✓ Maintain employee-wise records.

✓ Monitor statutory limits.

✓ Review compliance periodically.

After the Financial Year

✓ Correct only genuine errors.

✓ Obtain Finance/Tax approval.

✓ Reconcile payroll, accounts and TDS records.

✓ Preserve complete audit trail.
CFO & HR Checklist Before Revising Form 16

Review Area	Key Question
Legal	Is the revised treatment supported by law?
Error	Was the original payroll actually incorrect?
Evidence	Are records available to support the revision?
Accounting	Do books and payroll reconcile?
Consistency	Are similarly placed employees treated equally?
Audit	Can the employer defend the position?

Final Takeaway

The objective is not to deny employees legitimate tax benefits.

A responsible employer should proactively design compensation structures that provide maximum lawful employee benefits while maintaining compliance.

However:

Statutory payroll records should be corrected for genuine errors — not rewritten merely because a better tax outcome is discovered after the year has ended.

The strongest payroll philosophy is:

Provide legitimate benefits. Correct genuine mistakes. Maintain evidence. Report accurately.

A robust payroll governance framework protects:

✓ Employees through transparent benefits;
✓ HR teams through clear processes;
✓ CFOs through strong controls; and
✓ Organisations through audit-ready compliance.

A well-governed payroll system is not only tax compliant — it is a foundation of employee trust and organisational credibility

GST AATO Update 2026: Last Date to Correct Turnover on GST Portal is 31 July 2026

BY CA SUREKHA AHUJA 

GST Portal Opens AATO Amendment Facility for FY 2025-26

The GST Portal has provided taxpayers an opportunity to review and correct the Aggregate Annual Turnover (AATO) displayed on the GST dashboard for the Financial Year 2025-26.

Taxpayers who find any difference between the turnover shown on the GST Portal and their actual turnover as per books of accounts and GST returns can submit an AATO correction request within the prescribed period.

The last date to update or correct AATO on the GST Portal is 31 July 2026.

Taxpayers should complete the reconciliation and submit any correction request before the deadline to avoid compliance issues.

GST AATO Update Timeline 2026

Particulars	Date
AATO amendment window opens	1 July 2026
Last date for submitting correction request	31 July 2026
Review period by jurisdictional tax officer	1 August 2026 to 15 August 2026

Requests submitted within the amendment period will be examined as per the GSTN process and applicable departmental review mechanism.

What is AATO under GST?

AATO (Aggregate Annual Turnover) is the turnover figure calculated by the GST Portal based on GST returns filed by a taxpayer.

For businesses having multiple GST registrations under the same PAN, turnover reported across all GSTINs is considered for calculating aggregate turnover.

AATO generally includes:

• Taxable supplies
• Exempt supplies
• Export supplies
• Inter-State supplies
• Other turnover reported through GST returns

The GST Portal-generated AATO helps determine various GST compliance requirements.

Why is AATO Correction Important?

The turnover displayed on the GST Portal may differ from the taxpayer’s records due to reasons such as:

• Differences between books of accounts and GST returns
• Errors in return reporting
• Amendments made in GST filings
• Turnover differences among multiple GSTINs under the same PAN
• System-based calculation differences

Incorrect AATO may affect compliance decisions relating to:

1. E-Invoicing Applicability

Turnover limits are relevant for determining whether a taxpayer is required to follow e-invoicing provisions.

2. QRMP Scheme Eligibility

Aggregate turnover is considered for determining eligibility under the Quarterly Return Monthly Payment (QRMP) scheme.

3. HSN Reporting Requirements

Turnover thresholds impact HSN disclosure requirements in GST returns.

4. Annual Return and Compliance Reporting

Correct turnover ensures consistency between GST returns, financial statements, and annual compliance records.

How to Update AATO on GST Portal?

Taxpayers can follow these steps:

1. Log in to the GST Portal using valid credentials.
2. Check the AATO displayed on the dashboard for FY 2025-26.
3. Select the option available for viewing/updating turnover details.
4. Enter the correct turnover based on books of accounts and GST records.
5. Provide remarks explaining the reason for correction.
6. Upload supporting documents, if required.
7. Submit the request through DSC or EVC.
8. Track the status of the submitted request.

Documents to Verify Before Filing AATO Correction

Before submitting the request, taxpayers should reconcile:

• Sales register
• Financial statements
• GSTR-1 turnover
• GSTR-3B turnover
• Export and exempt supply details
• Turnover reported under all GSTINs linked with the same PAN

Maintaining proper reconciliation records will help support the correction request if required.

Important Reminder for Taxpayers

The dedicated AATO correction window for FY 2025-26 closes on: 31 July 2026

Businesses should not wait until the last date. Early verification and timely submission will help avoid last-minute technical issues and ensure accurate GST compliance records.

Conclusion

AATO displayed on the GST Portal plays an important role in determining various GST compliance requirements. Taxpayers should verify the portal-generated turnover with their books of accounts and GST returns.

Where any discrepancy is identified, the correction request should be submitted before 31 July 2026 to maintain accurate GST records and reduce the risk of future compliance challenges.

Foreign Unlisted Shares in ITR: Schedule FA, Schedule Unlisted Equity Shares, or Both - The CBDT's Own Instructions Settle the Debate

 By CA Surekha Ahuja

A Detailed Analysis of Schedule FA, Schedule Unlisted Equity Shares and Schedule CG for Resident Taxpayers

The ownership of foreign shares has become increasingly common among Indian residents due to global employment opportunities, overseas investments, ESOPs, startup investments, and international wealth diversification.

However, one question continues to create confusion during Income-tax Return (ITR) filing:

If a Resident taxpayer holds unlisted shares of a foreign company, should the investment be reported only in Schedule FA (Foreign Assets), or should it also be reported in Schedule Unlisted Equity Shares?

Many taxpayers and even professionals initially believe that once the foreign shares are disclosed in Schedule FA, no further reporting is required.

That understanding is incomplete. The issue has been specifically addressed by the CBDT through the ITR Instructions. The correct position is:

Unlisted shares of a foreign company may require reporting in Schedule FA as a foreign asset and also in Schedule Unlisted Equity Shares because both schedules serve different compliance purposes.

Further, if the shares are sold, the resulting capital gain is separately reported in Schedule CG.

Therefore, the same investment may involve three different reporting obligations.

Understanding the Legal Framework

Section 139 of the Income-tax Act, 1961

Section 139 requires eligible taxpayers to furnish their Income-tax Return in the prescribed form and manner.

The return is not merely a statement of income.

It is a comprehensive statutory disclosure document requiring taxpayers to provide information in the schedules prescribed under the notified ITR Forms.

Rule 12 of the Income-tax Rules, 1962

Rule 12 empowers the Central Board of Direct Taxes (CBDT) to prescribe the Income-tax Return Forms and related instructions.

Accordingly, the schedules contained in the notified ITR Forms form an integral part of the return filing process. A taxpayer cannot choose one schedule and ignore another where both reporting conditions are independently satisfied.

The Core Issue: One Asset, Multiple Characteristics

The mistake commonly made is analysing the investment only from one perspective.

For example: "The shares are foreign, therefore Schedule FA is enough."

This approach considers only the location of the asset.

Tax compliance requires examining all characteristics of the investment.

A foreign unlisted share can simultaneously be: A foreign asset; An unlisted equity investment; and A capital asset which may generate taxable capital gains on transfer.

Each characteristic can trigger a separate reporting requirement.

Schedule FA – Disclosure of Foreign Assets

Schedule FA is designed to disclose specified foreign assets held by eligible taxpayers, particularly Resident and Ordinarily Resident (ROR) taxpayers.

The objective of Schedule FA is international tax transparency and disclosure of overseas assets.

It focuses on the question:

Where is the asset located?

If the asset is situated outside India and falls within the scope of Schedule FA, disclosure is required.

Examples include: Foreign bank accounts; Foreign equity interests; Foreign financial assets; Foreign custodial accounts; and Other specified overseas assets.

A shareholding in a foreign company is therefore relevant for Schedule FA purposes.

Schedule Unlisted Equity Shares – Disclosure of Investment Details

Schedule Unlisted Equity Shares has a different objective.

It focuses on the nature of the investment.

The question it addresses is: What type of investment does the taxpayer hold?

The schedule captures details such as: Name of company; Number of shares; Opening balance; Shares acquired during the year; Shares transferred during the year; Closing balance; and Cost of acquisition.

Importantly, the focus is on whether the shares are unlisted equity shares.

The schedule does not operate merely on the basis of whether the company is Indian or foreign.

CBDT Clarification: The Debate Is Settled

The most important point is contained in the CBDT Instructions to the ITR Forms.

The instructions specifically clarify: Even in a case where shares in an unlisted foreign company have already been reported in Schedule FA, the same are required to be reported again in the Schedule relating to Unlisted Equity Shares.

This statement removes the ambiguity.

The CBDT itself recognises that: The same foreign unlisted shares may already appear in Schedule FA; and A separate disclosure is still required under Schedule Unlisted Equity Shares.

Therefore: Reporting under Schedule FA does not replace reporting under Schedule Unlisted Equity Shares.

Why Is This Not Duplicate Reporting?

A common question is: "Why should the same shares be disclosed twice?"

Because the purpose of each schedule is different.

Schedule	Purpose
Schedule CG	Reports taxable capital gains arising from transfer
Schedule FA	Reports foreign assets held by eligible taxpayers
Schedule Unlisted Equity Shares	Reports investment details of unlisted equity shares

The information may overlap, but the objective is different.

The law often requires multiple disclosures for the same transaction because different provisions require different information.

Practical Example

Facts Mr. Amit is a Resident and Ordinarily Resident in India.

He purchases:  1,000 shares of XYZ Inc., USA; The company is privately held; Shares are not listed on any stock exchange.

Purchase date: 1 July 2022 and  He sells all shares on 15 January 2026.

Reporting Requirement

1. Schedule CG – Capital Gains

Since the shares have been sold, the resulting capital gain must be reported.

This schedule answers: What income has arisen from the transfer?

2. Schedule FA – Foreign Asset Disclosure

The foreign shareholding must be reported where Schedule FA requirements apply.

This schedule answers: Does the taxpayer hold a foreign asset?

3. Schedule Unlisted Equity Shares

The same shares must also be reported under the unlisted equity share disclosure schedule.

This schedule answers: Does the taxpayer hold or has the taxpayer held unlisted equity shares?

Common Mistakes in Practice

Mistake 1: "I have reported foreign shares in Schedule FA, so nothing else is required."

Correct approach: Check Schedule Unlisted Equity Shares requirements separately.

Mistake 2:"Unlisted Equity Shares applies only to Indian companies."

Correct approach: The determining factor is the nature of the shares, not merely the country of incorporation.

Mistake 3: "I sold the shares during the year, so foreign asset reporting is irrelevant."

Correct approach: Sale affects Schedule CG. Other disclosure requirements must be examined independently based on the applicable ITR Instructions.

Mistake 4: "Reporting the same investment twice creates duplication."

Correct approach: Different schedules serve different statutory purposes.

Resident Status Matters

The reporting obligation depends significantly on residential status.

Resident and Ordinarily Resident (ROR)

Foreign asset disclosure requirements generally apply.

Resident but Not Ordinarily Resident (RNOR)

The applicability of Schedule FA should be examined based on the specific assessment year and ITR instructions.

Non-Resident

Schedule FA requirements generally do not apply in the same manner.

Therefore, determining residential status is the first step before analysing foreign asset reporting.

Professional Compliance Checklist

Before filing the return, taxpayers should verify:

✔ Residential status correctly determined.

✔ Foreign shares disclosed under Schedule FA where applicable.

✔ Unlisted foreign shares reported under Schedule Unlisted Equity Shares.

✔ Capital gains reported under Schedule CG if shares are transferred.

✔ Number of shares, acquisition date, transfer date and cost of acquisition are consistent across schedules.

✔ Latest CBDT ITR Instructions for the relevant Assessment Year are reviewed.

Final Conclusion

The question is not:

"Should foreign unlisted shares be reported in Schedule FA or Schedule Unlisted Equity Shares?"

The correct question is:

"Which independent reporting requirements apply to this investment?"

A foreign unlisted share has multiple legal characteristics.

It is:

• A foreign asset;
• An unlisted equity investment; and
• A capital asset when transferred.

Therefore:

• Schedule FA applies because it is a foreign asset;
• Schedule Unlisted Equity Shares applies because it is an unlisted equity investment; and
• Schedule CG applies when a taxable transfer takes place.

The CBDT Instructions have expressly clarified that reporting in Schedule FA does not eliminate the requirement to report the same investment under Schedule Unlisted Equity Shares.

The correct approach is therefore not to choose one schedule.

It is to comply with every applicable schedule.

Complete disclosure is not duplication—it is correct tax compliance.