Weekly Round-up on Tax and Corporate Laws | 1st to 6th September 2025

This weekly newsletter analytically summaries the key stories reported at taxmann.com during the previous week from 1st to 6th September, 2025.

1. Analysis of recommendations made in the 56th Meeting of the GST Council;
2. No TCS on compounding fee/fine collected from illegal miners & transporters of minerals: HC;
3. SEBI brings key reforms to REIT and InvIT Regulations, Effective September 1, 2025;
4. FAQs on the decisions of the 56th GST Council Meeting;
5. Recommending students to foreign universities for admission is export of service; eligible for refund of GST: HC;
6. Recognition of asset sale and leaseback arrangement from seller’s perspective: Ind AS Framework; and
7. Auditors’ role in evaluating internal financial controls: Insights from the Ola Electric Case.

1. Analysis of recommendations made in the 56th Meeting of the GST Council

The GST Council in its 56th meeting recommended rationalisation of duty structures, exemptions for essentials, and procedural simplifications including ITC refunds and time of supply clarifications. Revised measures apply from 22-09-2025, with existing levy on specified tobacco products continuing until cess liabilities are cleared. This was stated in Press Release, Dated 03-09-2025

About the Update

The GST Council held its 56th meeting in New Delhi under the chairpersonship of the Union Finance Minister. The Council recommended major changes in GST rates on goods and services, rationalisation of inverted duty structures, exemptions on certain essential items, and modifications in tax treatment for specified categories. Key recommendations include reduction in rates on agricultural machinery, renewable energy devices, bicycles, medicines, and medical devices, along with revisions in the automobile sector, textiles, processed food items, beauty and wellness services, and specified actionable claims.

The recommendations further cover procedural simplifications, including clarification on ITC refunds, changes in rate applicability based on time of supply provisions, and rationalisation measures for transport services and job work. It was decided that revised rates on goods and services, except for specified tobacco products, will come into effect from 22-09-2025. Existing rates along with compensatition cess for cigarettes, chewing tobacco, zarda, unmanufactured tobacco, and beedi will continue till loan and interest payment obligations under the compensation cess account are completely discharged.

Read the Detailed Analysis of 56th GST Council Meeting

Download Press Release

2. No TCS on compounding fee/fine collected from illegal miners & transporters of minerals: HC

The assessee was granted a mining lease and was collecting compounding fees/fine from illegal miners and transporters of minerals. During the Tax Deduction at Source (TDS) survey conducted under Section 133A(2A), it was found that the assessee had not collected Tax Collected at Source (TCS) on compounding fees/fines recovered from illegal miners and transporters of minerals. The Assessing Officer (AO) passed an order under sections 206C(1C), 206C(6) and 206C(7), treating the assessee as the assessee-in-default and raising a demand with interest and penalty.

The CIT(A) upheld the order of the AO. The Tribunal partly allowed the appeal on other issues but upheld the demand for TCS, interest, and penalty on the compounding fees. The matter reached the Chhattisgarh High Court.

The Court held that a careful perusal of the provisions of section 206C(1C) would show that tax at the rate of 2% has to be collected by the assessee from the leaseholder or license holder or with whom the assessee has entered into a contract or otherwise transferred any right or interest either in whole or in part in any parking lot or toll plaza or mine or quarry.

The person must be a leaseholder or license holder, or with whom the assessee has entered into a contract, or otherwise transferred any right or interest in the mines or fields. Meaning thereby the person from whom the TCS is collectable must be the person to whom the lease or license or otherwise any express contract, right or interest has been transferred by the assessee to any mine or quarry and royalty is payable by them to the State Government through the District Mining Officer.

There is no legislative mandate to collect TCS from the person involved in illegal mining or transporting illegal minerals. Section 206C(1C) specifically obliges the assessee to collect tax from the leaseholder or license holder or with whom the assessee has entered into a contract or otherwise transferred any right or interest, either in whole or in part, in any parking lot, toll plaza, mine, or quarry.

It is a well-settled position of law that fiscal statutes are strictly construed. In the matter of CIT v. Calcutta Knitwears [2014] 43 Taxmann.com 446 (SC), the Supreme Court held that when interpreting fiscal statutes, the court must not add or substitute a word in the provision. Therefore, the obligation to collect tax under section 206C(1C) cannot be extended to the person involved in illegal mining or transporting illegal minerals.

Read the ruling

3. SEBI brings key reforms to REIT and InvIT Regulations Effective September 1, 2025

Over the past decade, Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) have evolved from niche instruments to becoming important pillars of India’s capital markets. These vehicles provide investors with access to real estate and infrastructure projects without directly owning the assets, while offering the benefits of regular cash flows, professional management, and market liquidity. With participation steadily rising among both institutional and retail investors, SEBI has been actively refining the regulatory framework to make these products stronger, more transparent, and investor-friendly.

On 1st September 2025, SEBI notified amendments to the REITs Regulations, 2014 & InvITs Regulations, 2014. The key highlights of the amendments include:

a) Amendment to Definition of “Public” in REIT and InvIT Regulations

Earlier, “public” for the purposes of offer and listing of units was defined to mean any person other than a related party of the REIT or InvIT, or any other person as may be specified by the SEBI. It also allowed related parties to be treated as public if they were qualified institutional buyers (QIBs).

Under the amended framework, the definition has been tightened. The sponsor, sponsor group, manager or investment manager, and project manager are now expressly excluded from being treated as public, even if they qualify as QIBs. This ensures that the public float in both REITs and InvITs reflects only independent investors and not insiders.

b) Alignment of Quarterly Reporting Timelines for REITs and InvITs

The minimum investment threshold for both REITs and InvITs has been significantly reduced. Earlier, the manager or investment manager had to submit quarterly activity reports within thirty days from the end of each quarter. Under the new framework, this fixed deadline has been replaced, and reports must now be submitted within the time allowed by SEBI for filing quarterly financial results.

Further, for InvITs, the internal reporting requirement has also been updated. The investment manager must now submit activity and performance reports to the board in line with the quarterly financial results timeline, rather than within thirty days of quarter-end.

c) Change in Minimum Investment for Privately Placed InvITs

SEBI has significantly reduced the minimum investment threshold in privately placed InvITs. Earlier, the minimum investment required from any investor was Rs. 1 crore, with an additional condition that if the InvIT invested at least 80% of its assets in completed and revenue-generating projects, the minimum investment would rise to Rs. 25 crore.

Under the amended framework, the minimum investment has been reduced to Rs. 25 lakhs, and the special requirement of Rs. 25 crore has been completely removed.

d) Treatment of Negative Cash Flows at HoldCo Level for REITs and InvITs

SEBI has amended the norms governing the distribution of cash flows by HoldCos to REITs and InvITs. Previously, the requirement was that 100% of cash flows received from underlying SPVs must be passed on, and at least 90% of cash flows generated by the HoldCo itself must also be distributed.

The amendment introduces flexibility where the HoldCo’s own net distributable cash flow is negative. In such cases, the HoldCo may offset the shortfall against inflows from its SPVs, provided this adjustment is fully disclosed to unitholders in the manner prescribed by the SEBI

e) Change in Annual Valuation Timeline for REITs and InvITs

A full valuation must continue to be carried out as of March 31 each year. However, instead of the earlier two-month submission deadline, the valuation report must now be submitted to stock exchanges along with annual financial results. Similarly, half-yearly valuations as of September 30 must now be submitted with the quarterly financial results for that period.

f) Introduction of Quarterly Valuation for Highly Leveraged InvITs

A new requirement has been introduced for InvITs with consolidated borrowings and deferred payments exceeding 49% of assets. Such InvITs must carry out quarterly valuations as of June, September, and December, and submit reports along with quarterly financial results. As a relaxation, no separate quarterly valuation is required for September 30 if a half-yearly valuation is already submitted.

Read the Notification regarding REIT reforms

Read the Notification regarding InvIT reforms

4. FAQs on the decisions of the 56th GST Council Meeting

The CBIC has issued 75 FAQs on the 56th GST Council decisions clarifying revised rates, time of supply, ITC, refunds, goods in transit, and sector-specific services. Revised rates apply from 22-09-2025, while existing cess on specified tobacco products continues till dues are cleared. The FAQs were stated in Press Release, Dated 03-09-2025.

About the Update

The CBIC has issued a press release containing 75 FAQs on the decisions taken in the 56th GST Council meeting held in New Delhi. The FAQs provide clarifications on the revised GST rates applicable on a wide range of goods and services, the date of effect of these changes, the applicable provisions relating to time of supply, ITC entitlements, treatment of goods in transit, and conditions for refunds. The release also details revised rates on specific categories such as food items, beverages, medicines, medical devices, vehicles, agricultural machinery, renewable energy devices, textiles, and beauty and wellness services.

The FAQs outline practical compliance aspects including determination of applicable GST rates based on supply dates, handling of advances and invoices issued before and after rate changes, ITC utilisation and reversals, impact on imports, and validity of existing e-way bills. They also specify rate treatment for sector-specific services such as GTA, job work, works contracts, passenger transport, insurance, and admission to sporting events. Taxpayers are required to adhere to the revised rates from 22-09-2025, while specified goods like cigarettes and chewing tobacco will continue under existing rates until till loan and interest payment obligations under the compensation cess account are completely discharged.

Read the FAQs

5. Recommending students to foreign universities for admission is export of service; eligible for refund of GST: HC

The petitioner entered into an agreement with a foreign university to provide services. The petitioner was recommending names of students to foreign universities for being enrolled as students. Assessee paid the tax on the services so provided and claimed a refund of the same. The matter was placed before the Bombay High Court for consideration.

High Court Held

The High Court held that the entire definition of ‘export of services’ under Section 2(6) of the IGST Act has to be read as a whole and not in a piecemeal manner and will have to be read in the background of what the statute defines to mean a ‘recipient’ as indicated in section 2(6)(ii) of IGST Act, as defined in Section 2(93) of GST Act in conjunction with section 13(2) of IGST Act. Considering the definition of ‘recipient’ as contained in section 2(93) of the GST Act, which holds an entity to be a recipient in case consideration is payable on the supply of services, is the person who is liable to pay that consideration and the language of section 13(2) read with section 2(6) of IGST in light of the definition of intermediary as contained in section 2(13) of IGST, it was held that the petitioner would not fall within the definition of ‘recipient’. Therefore, the petitioner would be entitled to a refund of GST paid by the petitioner to the department subject to the receipt of consideration in foreign currency.

Read the Ruling

6. Recognition of asset sale and leaseback arrangement from seller’s perspective: Ind AS Framework

In today’s business environment, companies often unlock value from their fixed assets by entering into sale-and-leaseback arrangements. Such transactions help release capital while allowing the company to continue using the underlying asset. However, the accounting treatment of these arrangements requires careful evaluation under Ind AS 115 and Ind AS 116.

Ind AS 116, Leases, provides clear guidance on how these transactions should be treated. Para 99 requires that the transfer be evaluated under Ind AS 115 to determine whether the transaction qualifies as a sale, i.e., whether control has passed to the buyer-lessor. Once this condition is met, Para 100 requires the seller-lessee to recognise a Right-of-Use (ROU) asset for the portion of rights retained and a lease liability equal to the present value of lease payments. Only the gain relating to the rights transferred is recognised immediately in profit or loss, with the balance effectively deferred.

For instance, a company sold an office building with a carrying amount of Rs. 800 lakhs to XYZ Finance Limited for Rs. 1,000 lakhs, representing fair value. Simultaneously, it entered into a leaseback for 10 years with annual rentals of Rs. 120 lakhs at an incremental borrowing rate of 8%. Since control and risks and rewards passed to XYZ Finance Limited, the transfer qualifies as a sale. The lease liability is measured at Rs. 805 lakhs (PV of lease rentals), and the ROU asset is recorded at Rs. 644 lakhs (proportionate to the rights retained). Out of the total gain of Rs. 200 lakhs, only Rs. 39 lakhs is recognised in the Profit and Loss account, corresponding to the rights transferred, with the balance effectively deferred through the ROU asset.

Read the Ruling

7. Auditors’ role in evaluating internal financial controls: Insights from Ola Electric Case

Section 143(3)(i) of the Companies Act, 2013 places a clear duty on statutory auditors of listed companies and specified unlisted entities to report whether adequate internal financial controls with reference to financial statements exist and whether they are operating effectively. Complementing this statutory requirement, the Standards on Auditing (SAs) highlight the auditor’s dual role i.e. evaluating the control environment and identifying risks under SA 315 and communicating significant deficiencies to management and those charged with governance under SA 265. Together, these provisions stress that effective internal controls are the backbone of reliable financial reporting.

This responsibility was brought into sharp focus in the recent case of Ola Electric Mobility Limited. In its annual report for the financial year 2024-25, the statutory auditor flagged a material weakness in the internal controls of Ola Electric’s largest revenue-contributing subsidiary. The weakness related to the absence of robust systems for physical verification of raw materials and finished scooters lying at retail outlets and distribution centres. The auditor cautioned that this gap could potentially lead to material misstatements in critical financial areas such as inventories, cost of materials consumed, and work-in-progress balances, raising concerns over the accuracy of financial reporting.

While the auditor confirmed that, in all other material respects, Ola Electric maintained adequate internal controls as of March 31, 2025, this observation highlights the auditor’s critical role under SA 315 and SA 265 in evaluating both the design and operating effectiveness of controls.

Read the Story