Weekly Round-up on Tax and Corporate Laws | 28th April to 3rd May 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from April 28^th to May 3^rd, 2025, namely:

1. CBDT notifies ITR forms 1 to 5 for Assessment Year 2025-26;
2. Companies/Firms must now show a 3-year track record in gems and jewellery trade to open Diamond Dollar Account: RBI;
3. Goods purchased by assessee in name of non-existent entity were liable to be confiscated under CGST Act: HC;
4. GSTN mandates HSN code reporting in Table 12 and compulsory document details in Table 13 of GSTR-1/1A from May 2025: Advisory;
5. CBIC issued instructions for Grievance Redressal Mechanism against processing of application for GST registration; and
6. Accounting treatment of non-refundable upfront fees representing material rights under Ind AS framework.

1. Changes introduced in the new ITR forms 1 to 5 notified for Assessment Year 2025-26

The Central Board of Direct Taxes (“CBDT”) has notified the Income Tax Return (ITR) Form 1 to 5  for the Assessment Year (“AY”) 2025–26, applicable for income earned during the Previous Year (“PY”) 2024–25 (01-04-2024 to 31-03-2025).

Unlike in the last couple of years, when these forms were released well in advance, typically before March, the ITR forms have been released with a delay of more than a month. This created an anticipation that the department may have to extend the due date to file the return of income. This apprehension is based on the instructions given by the High Court [All Gujarat Federation of Tax Consultants vs. CBDT [2015] 61 taxmann.com 431 (Gujarat)] to the CBDT to extend the due date for filing income-tax returns so as to alleviate, to a certain extent, hardships caused to assessees on account of the delay in providing ITR filing utilities on time.

The following are the key changes introduced in the ITR forms.

• Salaried individuals or any assessee eligible for ITR-1 and small business owners eligible for ITR-4 can continue to use these forms, even if they have LTCG under Section 112A, provided the total LTCG does not exceed Rs. 1,25,000 and there is no brought forward or carry forward capital loss.
• New ITR Forms have been updated to remove the reference to the Aadhaar Enrolment ID. Taxpayers must now provide their Aadhaar number/the Aadhaar number of partners, members, settlors, trustees, beneficiaries, and executors, as the case may be, when filing their returns.
• The new ITR forms introduce a more detailed disclosure structure. They seek confirmation of past filings of Form 10-IEA and ask whether the assessee wants to continue opting out of the New Tax Regime in the current year.
• In the capital gain schedule, the return requires a disclosure of the date of transfer, separate reporting for transfers made before and on or after 23rd July 2024, and the proper application of revised tax rates and indexation rules.
• In the new ITR-2 and ITR-3 forms, Schedule AL now applies only to individuals whose total income exceeds Rs. 1 crore.
• In the new ITR Forms, taxpayers are required to mention the specific section under which TDS has been deducted. This detail will be furnished in the Tax Payment schedule.

Read the Notification 40/2025

Read the Notification 41/2025

Read the Notification 42/2025

Read the Notification 43/2025

2. Companies/Firms must now show a 3-year track record in gems and jewellery trade to open Diamond Dollar Account: RBI

In a significant move aimed at promoting transparency in the gems and jewellery sector, the RBI vide notification dated April 29, 2025, notified the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) (Sixth Amendment) Regulations, 2025. As per the amended norms, exporter firms and companies seeking to open a Diamond Dollar Account (DDA) must have a track record of at least 3 years in the import or export of diamonds and coloured gemstones studded jewellery.

2.1 Regulatory Framework for Opening and Maintaining Diamond Dollar Accounts (DDAs)

As per Regulation 4 of the FEM (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015 an Authorized Dealer Category-I bank in India may allow firms and companies to open, hold and maintain Diamond Dollar Accounts (DDAs) in India. This is subject to their compliance with the eligibility criteria outlined in the Foreign Trade Policy and the directions issued by the RBI. The terms and conditions governing the DDA Scheme are specified in Schedule II of the regulations.

2.2 Key Amendment to Schedule II (Annexure: Application for opening Diamond Dollar Account)

An amendment has been made to the annexure titled ‘Application for Opening Diamond Dollar Account’ under Schedule II of the principal regulations. Currently, exporter firms and companies must have a minimum 2-year track record in the import/export of diamonds and coloured gemstone-studded jewellery/plain gold jewellery. Further, these entities must have an average annual turnover of Rs. 3 crore or above during the preceding 3 licensing years.

With the amendment, the minimum tenure has been increased from 2 to 3 years. All the other eligibility criteria such as KYC norms, compliance with IEC requirements remain unchanged.

2.3 Impact on Exporter Firms and Companies

The amended norms provide stricter entry criteria for opening a DDA, ensuring that only well-established and compliant firms are eligible to open these accounts. This initiative aims to reduce potential risks and enhance financial transparency within the sector. By tightening the requirements, the changes encourage a more stable and trustworthy financial environment. These adjustments also ensure that only firms with a strong track record of compliance and financial stability can participate, leading to better standards across the industry.

Read the Notification

3. Goods purchased by assessee in name of non-existent entity were liable to be confiscated under CGST Act: HC

The Hon’ble Gujarat High Court held that goods purchased in the name of a non-existent entity were liable for confiscation under Section 130 of the CGST Act. It observed that bogus invoicing warranted statutory action and held that the petitioner should pursue appellate remedy under Section 107. This was held in Krishna Enterprise vs. Union of India – [2025].

Facts

The petitioner, a registered taxpayer under the CGST Act, purchased goods from an undisclosed third-party supplier and was provided an invoice and an e-way bill in the name of ‘Sunrise Enterprise’, an entity which later turned out to be non-existent. The goods, along with the conveyance, were intercepted by the GST authorities during transit. Upon verification, it was discovered that the supplier, ‘Sunrise Enterprise’, was a fictitious entity, confirmed by a physical inspection at the address mentioned in the GST records.

Consequently, the authorities initiated proceedings under Section 130 of the CGST Act on the grounds of fraudulent and bogus invoicing. A show cause notice was issued in FORM GST MOV-10, followed by an order for confiscation of both the goods and the conveyance in FORM GST MOV-11. The petitioner, challenging the confiscation order, filed a writ petition before the Gujarat High Court.

Held

The Hon’ble Gujarat High Court held that the goods were rightly liable for confiscation under Section 130 due to the bogus invoicing by the non-existent entity. The Court emphasized that the challenge to the confiscation order should be addressed by the Appellate Authority, not the Writ Court, as an alternate remedy was available under Section 107 of the CGST Act. The writ petition was dismissed, affirming the validity of the confiscation proceedings.

Read the Ruling

4. GSTN mandates HSN code reporting in Table 12 and compulsory document details in Table 13 of GSTR-1/1A from May 2025: Advisory

The GSTN mandated dropdown-based HSN code reporting in Table 12 and compulsory document detail disclosure in Table 13 of GSTR-1/1A, effective May 2025. It clarified that Table 12 will be bifurcated into B2B and B2C sections, and manual HSN entry will no longer be permitted. This was stated in GSTN Advisory dated 01-05-2025.

About the Update

The GSTN has issued an advisory regarding the implementation of Phase-III for Table-12 in Form GSTR-1 and Form GSTR-1A, effective from the return period of May 2025. In this phase, the manual entry of HSN codes will be replaced by a dropdown menu, allowing taxpayers to select the appropriate HSN code. Moreover, Table-12 will be divided into two sections: B2B and B2C, to separately report these supplies.

Additionally, starting from May 2025, Table 13 of Form GSTR-1/1A is also being made mandatory for the taxpayers.

Read the Notification

5. CBIC issued instructions for Grievance Redressal Mechanism against processing of application for GST registration

The CBIC established a grievance redressal mechanism for GST registration issues, allowing applicants to escalate grievances to the Principal Chief Commissioner or Chief Commissioner of Central Tax. It mandated the publication of a dedicated email address for grievance submissions, with a clear process for resolution and reporting to the DGGST. This was stated in GST Instruction No. 04/2025, dated 03-05-2025.

About the Update

The CBIC has issued an instruction for establishing a structured grievance redressal mechanism to address issues arising during the processing of GST registration applications. Applicants allocated to the Central jurisdiction, who encounter grievances such as queries raised in contravention of Instruction No. 03/2025, Dated 17-04-2025 or rejection of applications without valid grounds, may now escalate such matters to the jurisdictional Principal Chief Commissioner or Chief Commissioner of Central Tax. These authorities are directed to designate and publicize a dedicated email address for grievance submissions, ensuring wide outreach and accessibility. Applicants are required to provide their Application Reference Number (ARN), jurisdiction details (Centre/State), and a concise description of the issue while raising a grievance.

In instances where the grievances pertain to State jurisdiction, the concerned Chief Commissioner’s office shall forward the representation to the respective State authority and endorse a copy to the GST Council Secretariat. The Principal Chief Commissioners/Chief Commissioners are further mandated to ensure timely resolution of grievances and to communicate the outcome to the applicants. In cases where queries raised by officers are found to be valid, applicants shall be appropriately advised. A monthly status report on grievance redressal must be submitted to the Directorate General of GST (DGGST) for consolidation and submission to the Board. States and Union Territories have also been encouraged to adopt a similar redressal framework to ensure consistency and efficiency across jurisdictions.

Read the Instructions

6. Accounting treatment of non-refundable upfront fees representing material rights under Ind AS framework

Accurate revenue recognition is foundational to the integrity and comparability of financial reporting. One particular area that often leads to inconsistency and misstatement is the treatment of non-refundable upfront fees, such as joining fees, activation charges, or setup costs, that do not in themselves represent distinct goods or services to customers. These fees are frequently misunderstood and prematurely recognised as revenue, thereby distorting the actual economic substance of contractual arrangements.

Such misclassifications are more than technical oversights; they materially affect the timing and pattern of revenue recognition, which can mislead stakeholders about the company’s financial health and performance. The core principle under relevant accounting standards, such as Indian Accounting Standard (Ind AS) 115, Revenue from Contracts with Customers, is that revenue should be recognised when or as a performance obligation is satisfied. If an upfront fee does not independently transfer a good or service to the customer, it cannot be considered earned at the time of payment.

To illustrate, consider the case of a company that charges a non-refundable onboarding fee alongside its annual subscription. While the fee is immediately booked as revenue, a deeper analysis shows that it actually grants the customer an economic benefit extending into future years, namely the right to renew the subscription without paying the onboarding fee again. This right constitutes a separate performance obligation. Proper treatment requires spreading the revenue recognition over the expected customer relationship period, thus aligning financial reporting with the actual pattern of benefit delivery.

This example underscores the critical need for entities to carefully assess whether upfront charges relate to distinct services or instead confer material rights that merit deferral of revenue. Ensuring compliance with the underlying principles of performance obligations and material rights not only leads to more accurate financial reporting but also upholds transparency and trust among investors, regulators, and other stakeholders.

Read the Story