Weekly Round-up on Tax and Corporate Laws | 21st to 26th April 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from April 21^st to 26^th, 2025, namely:

1. CBDT notifies 10 luxury goods liable to TCS; list includes home theatre systems, shoes, handbags;
2. SEBI extends trading window closure under insider trading norms to the immediate relatives of designated persons;
3. notifies Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025;
4. Agreement with supplier stating he would pay GST is not tenable to avoid RCM liability: HC; and
5. Accounting treatment of discounts, bonuses and rebates in inventory valuation as per Ind AS framework.

1. CBDT notifies 10 luxury goods liable to TCS; list includes home theatre systems, shoes, handbags

Section 206C of the Income-tax Act deals with the collection of tax at source (TCS) on the business of trading in alcoholic liquor, forest produce, scrap, etc. Sub-clause (1F) of section 206C mandates sellers at a rate of 1% on the sale of motor vehicles priced over Rs. 10 lakh.

Finance (No. 2) Act 2024, w.e.f. 1-1-2025, has expanded the scope of Section 206C(1F) to levy TCS on any other goods of value exceeding Rs. 10 lakh. Such other goods shall be notified by the Government and will be in the nature of luxury goods.

Now, the Central Board of Direct Taxes (CBDT) has notified the following 10 luxury goods, which shall be subject to 1% TCS under section 206C(1F).

1. Wristwatches
2. Art items such as antiques, paintings, and sculptures
3. Collectibles, including coins and stamps
4. Yachts, rowing boats, canoes, and helicopters
5. Sunglasses
6. Handbags and purses
7. Pair of shoes
8. Sportswear and equipment like golf kits or ski wear
9. Home theatre systems
10. Horses used for racing or polo

The Board has also amended Form No. 27EQ to include the list of notified goods in the Annexure to report the collection of tax while furnishing the TCS return.’ The Board also clarified that TCS will be levied on the sale of a single item of the notified goods with a value exceeding ten lakh rupees.

The provisions will become effective from the date of publication of the notification, i.e. 22.04.2025.

Read the Notification

Read the Clarification

2. SEBI extends trading window closure under insider trading norms to the immediate relatives of designated persons

In a significant move to enhance transparency and curb insider trading, SEBI vide Circular No. dated April 21, 2025, has extended the ambit of the ‘automated trading window closure mechanism’ under the SEBI (Prohibition of Insider Trading) Regulations, 2015, to include the immediate relatives of designated persons (DPs). The term ‘automated trading window closure mechanism’ refers to a specific period when designated persons and their immediate relatives are restricted from trading in the securities of a listed company. The aim is to prevent insider trading and ensure fair market practices.

2.1 Background and Rationale

Under the SEBI (PIT) Regulations, 2015, listed companies are required to close the trading window for Designated Persons (DPs) and their immediate relatives during periods when UPSI is likely to exist, such as before the declaration of financial results.

On August 5, 2022, SEBI had introduced a framework to restrict trading by DPs by freezing their PAN at the security level during the Trading Window Closure period. The Stock Exchanges and Depositories would freeze the PAN at the security level based on the information provided by listed companies, ensuring that DPs cannot buy or sell securities during the closure period.

Initially, this framework applied to DPs of all listed companies and significantly reduced the compliance burdens of listed entities while eliminating inadvertent trading during the closure period. Considering the smooth implementation of the framework, SEBI has now proposed extending it to include the immediate relatives of DPs. This expansion aims to strengthen the safeguards against potential misuse of UPSI and enhance market integrity.

2.2 Meaning of ‘Immediate Relatives’

As per Regulation 2(1)(f) of SEBI (PIT) Regulations, 2015, an “immediate relative” means a spouse of a person, and includes parent, sibling, and child of such person or of the spouse, any of whom is either dependent financially on such person, or consults such person in taking decisions relating to trading in securities.

2.3 Key Highlights of SEBI’s Extended Framework

Some of the key Highlights of SEBI’s framework are as follows –

• PAN-Level Security Freeze – The PANs of DPs and their immediate relatives will be frozen at the security level during the Trading Window Closure period.
• Timelines for phase-wise implementation of Framework – Phase 1 will cover the top 500 companies based on BSE market capitalisation as of March 31, 2025, listed on BSE, NSE, and Metropolitan Stock Exchange of India (MSEI). The PAN-ISIN freeze for these companies will start on July 01, 2025. Phase 2 will include all the remaining companies listed on BSE, NSE, and MSEI and companies that become listed on stock exchanges after the issuance of this circular, which is April 21, 2025. The PAN-ISIN freeze for these companies will start on October 1, 2025.
• Submission of Information – Listed companies must submit accurate information, including the name, PAN, DP ID and client ID of DPs and their immediate relatives to the Designated Depository at least two trading days before the trading window closure period begins.
• Information Flow – The Designated Depository (DD) must forward details received from the listed company to the Stock Exchanges and Depositories at least one trading day before the commencement of the trading window closure period.
• Trading Restrictions – The Depositories must restrict off—market transactions and pledge creation, including all types of encumbrances, with a reason code as “Trading Window Closure Period.”
• Exemptions – The system must include a provision specifying the details of DPs and their immediate relatives who are to be exempted by a listed company from Trading Window restrictions.
• Freezing/de-freezing of PAN – The freezing/de-freezing of PAN at the security level due to changes in the addition or deletion process will be effective post-market hours.

2.4 Conclusion

SEBI’s extension of the automated trading window closure framework to immediate relatives of designated persons strengthens market integrity by addressing existing compliance gaps. It streamlines compliance requirements for listed companies, enhances enforcement, and promotes greater investor confidence in the securities market. This proactive step not only tightens controls around insider trading but also sets a precedent for a stronger and more transparent market practice, ultimately benefiting all stakeholders involved.

Read the Circular

3. Govt. notifies Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025: Notification

The Ministry of Finance has issued the Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025, laying down the procedures for electronic filing, case management, and hearings before the GSTAT. The rules also define the duties of the Registrar and prescribe the applicable fees. The said rules were notified vide Notification No. G.S.R. 256(E), dated 24-04-2025.

About the Update

The Ministry of Finance has issued the Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025, under Section 111 of the Central Goods and Services Tax Act, 2017. These rules provide a procedural framework for the functioning of the Goods and Services Tax Appellate Tribunal (GSTAT), including the electronic filing of appeals, documentation requirements, and Tribunal powers to manage timelines and procedural aspects. They also specify the roles and responsibilities of the Registrar in managing case registration, listing, and record-keeping.

The rules mandate that appeals must be filed electronically through the GSTAT portal, and each appeal must include the relevant certified copies of the orders being appealed. The Tribunal is empowered to extend timelines, summon additional documents, and manage hearings, which can be conducted in physical or electronic mode. Fees have been set for certain procedures, including interlocutory applications and certified copies of orders. Non-compliance with procedural requirements may result in costs being imposed.

The said rules shall come into force on the date of their publication in official gazette.

Read the Notification

4. Agreement with supplier stating he would pay GST is not tenable to avoid RCM liability: HC

The Hon’ble Allahabad High Court held that an agreement with the supplier stipulating that the supplier would pay GST cannot absolve the petitioner from his statutory liability under the reverse charge mechanism. The Court reasoned that statutory obligations under Section 9 of the GST Act prevail over private agreements, and in the absence of any supporting notification, the petitioner remained liable for payment. This was held in Devendra Kumar Singh Contractor vs. Union of India [2025].

Facts

The petitioner, a taxpayer, was issued a show cause notice by the department for non-payment of GST under the reverse charge mechanism (RCM). The show cause notice was issued due to the petitioner’s failure to deposit GST on a specific transaction. The petitioner responded to the notice by asserting that, under the work order agreement with the supplier, the supplier had agreed to pay the GST, and therefore, the petitioner should not be held liable for its payment under RCM. The petitioner’s contention was that the reverse charge mechanism allowed the supplier to assume responsibility for GST payment, thus absolving the petitioner from liability. However, the department rejected this defence, concluding that the petitioner’s failure to deposit the GST, based on the agreement with the supplier, resulted in the non-payment of the correct amount of tax. Consequently, the department issued a demand for the unpaid GST, disregarding the agreement between the petitioner and the supplier. The petitioner filed a petition before the Allahabad High Court challenging the demand raised by the department.

Held

The Hon’ble Allahabad High Court held that the agreement between the petitioner and the supplier, stating that the supplier would bear the GST, could not absolve the petitioner from the statutory liability to pay GST under the reverse charge mechanism. The Court held that the liability remained with the petitioner as per the statutory provisions. The petitioner’s failure to cite a relevant notification under Section 9 of the GST Act meant the plea based on the agreement was rejected. The Court reinforced that private agreements cannot override statutory tax obligations.

Read the Ruling

5. Accounting treatment of discounts, bonuses and rebates in inventory valuation as per Ind AS framework

Accurate accounting treatment of discounts, bonuses, and rebates is essential to ensure that inventory is valued correctly and financial statements present a true and fair view. As per Ind AS 2, Inventories, the cost of inventories includes all costs necessary to bring the inventory to its present location and condition, such as purchase price, taxes, and directly attributable costs, while trade discounts, rebates, and similar reductions must be deducted in determining the cost of purchase. It is important to distinguish between incentives that should reduce inventory cost and those that should be recognized separately in the statement of profit and loss. Incorrect treatment can misstate inventory values and profitability, impacting financial analysis and decision-making.

For example, consider a situation where an entity receives a cash discount of ₹20,000 on immediate bulk payment for purchasing goods. This cash discount must be deducted from the cost of inventories, as it reduces the purchase cost and should not be recognized as separate income. If the entity earns a sales based bonus of ₹2,00,000 after achieving sales targets. Since this bonus depends on sales performance and is earned post-sale, it must be recognized as income in the profit and loss account and should not adjust the cost of inventory. Additionally, if the supplier grants an annual purchase rebate based on total purchases, and 25% of the stock remains unsold at year-end, the rebate must be allocated proportionately, with 75% reducing the cost of goods sold and 25% reducing the carrying amount of closing inventory.

In conclusion, entities must carefully analyze the nature and timing of discounts, bonuses, and rebates to determine their appropriate accounting treatment. Proper application of accounting standards ensures consistency, transparency, and credibility in financial reporting, supporting informed decision-making by stakeholders.

Read the Story