Weekly Round-up on Tax and Corporate Laws | 29th September to 04th October 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from Sep 29th to Oct 04th, 2025, namely: 

1. RBI proposes introducing risk-based deposit insurance premiums for banks;  
2. ED can inspect documents filed before Magistrate by IT Dept. to carry out investigation: HC;
3. CBIC withdraws circular on evidence requirement for reversal of ITC by the recipient in post-sale discount;
4. CBIC introduces risk-based mechanism to provide 90% provisional GST refunds in specified cases; and
5. NFRA releases Interaction Series 4 on audit of accounting estimates and judgements for impairment of non-financial asset. 

1. RBI proposes introducing risk-based deposit insurance premiums for banks

The RBI, vide its Press Release dated October 1, 2025, issued a Statement on various developmental and regulatory policies outlining a series of key measures across four broad areas relating to (i) Regulations; (ii) Foreign Exchange Management, (iii) Consumer Protection; and (iv) Financial Markets. These initiatives aim to strengthen financial stability, promote credit flow and market efficiency, simplify regulatory compliance and support cross-border trade. 

Key Proposals

Some of the key proposals as laid down in the Statement on Developmental and Regulatory Policies are discussed in detail hereunder: 

• Introduction of Risk-based deposit insurance premiums for banks
  The Deposit Insurance and Credit Guarantee Corporation (DICGC) has been operating the deposit insurance scheme since 1962 on a flat rate premium basis. Presently, banks are charged a premium of 12 paise for every Rs 100 of assessable deposits. While the existing system is simple to understand and administer, it does not differentiate between banks based on their financial soundness. Therefore, the RBI has proposed introducing a Risk-Based Premium model, which will help banks that are sound to save significantly on the premiums they pay.  

• RBI to implement Expected Credit Loss (ECL) framework for provisioning of loans by banks
  The RBI has proposed a framework for adopting an expected credit loss (ECL) approach for provisioning by banks in case of loan defaults. The ECL framework is a forward-looking system that requires banks and financial institutions to provision for anticipated credit losses on financial assets such as loans, rather than waiting for losses to occur.
  
  Under this system, financial assets are classified into three stages (Stage 1, Stage 2 and Stage 3) based on their credit risk and provisioning is made accordingly. The framework will apply to Scheduled Commercial Banks (SCBs) and All India Financial Institutions.
  
  Currently, banks in India follow the incurred loss approach. The incurred loss approach is a method for banks to set aside reserves for loan losses only after a specific ‘trigger event’ has occurred. This is a backwards-looking model, as it assumes all loans will be repaid until a loss has actually been incurred.  

• Review of Capital Market Exposures Guidelines for banks
  RBI has proposed a review of the Capital Market Exposures Guidelines for banks. The review proposes to provide an enabling framework for banks to finance acquisitions by Indian corporates. The review also proposes to enhance the lending limit by banks against shares, units of REITs, and InvITs, while removing the regulatory ceiling on lending against listed debt securities. A more principle-based framework for lending to capital market intermediaries is also proposed.  

• Extension of repatriation period for export proceeds held in IFSC accounts to 3 months 
  In January 2025, the RBI permitted Indian exporters to open foreign currency accounts with banks outside India for the realisation of export proceeds. Funds in these accounts can be used for making import payments or have to be repatriated by the end of next month from the date of receipt of the funds. The RBI has now decided to extend the repatriation time period from one month to three months in cases of foreign currency accounts maintained in IFSCs in India. This measure is expected to encourage Indian exporters to open accounts with IFSC banking units and also increase forex liquidity within IFSCs.  

• Relaxation in compliance requirements for Small Value Exporters/Importers
  To ease compliance for exporters/importers, especially those dealing in small-value goods and services, the RBI has decided to simplify the reconciliation process in the Export Data Processing and Monitoring System (EDPMS) and the Import Data Processing and Monitoring System (IDPMS).As per the revised guidelines, bills can be reconciled and closed by an AD bank in EDPMS or IDPMS, based on a declaration by the concerned exporter or importer, as the case may be, that the amount has been realised, for a shipping bill, or paid against a Bill of Entry, for entries (including outstanding entries) in EDPMS/IDPMS of value equivalent to INR 10 lakh per bill, or less. This measure is expected to reduce the compliance burden on small-value exporters and importers and enhance the ease of doing business.   

• RBI to allow AD banks in India and overseas branches to lend in INR to residents of Bhutan, Nepal and Sri Lanka
  The RBI has decided that AD banks in India and their overseas branches may be permitted to lend in INR to persons resident in Bhutan, Nepal, and Sri Lanka, including banks in these jurisdictions, to facilitate cross-border trade transactions.

• Allowing PROIs holding Special Rupee Vostro accounts to invest surplus balances in corporate debt instruments
  To promote exports from India and to support the increasing interest of the global trading community in INR, the RBI had permitted Special Rupee Vostro Accounts (SRVA) in July 2022 to facilitate invoicing, payment and settlement of exports/imports in INR. The arrangement permitted rupee surplus balances in SRVA to be invested in government securities, including T-bills.  

To expand investment opportunities in India for SRVA holders, the RBI has now decided to permit balances of these accounts to be invested in corporate bonds and commercial papers.  

Read the Press Release  

2. ED can inspect documents filed before Magistrate by IT Dept. to carry out investigation: HC

The Director General of Income Tax (Inv.) received information from the competent authority of France that the assessee and his family members were associated with certain foreign entities. The information was in the form of master-sheets and was received in Paris (France) by the Competent French Authority as per the provisions of Article 28 of the Double Taxation Avoidance Convention (DTAC) between India and France. 

The said information was placed on record by the Income Tax Department in the criminal proceedings initiated against the assessee. During the pendency of the proceedings, the Enforcement Directorate (ED) moved an application for inspection of the information/documents. The application was allowed by the Magistrate, and the assessee filed a revision to the Sessions Court. 

The Sessions Court dismissed the revision petition. Aggrieved by the order, the assessee filed a petition under Section 482 of the Code of Criminal Procedure before the High Court  

The High Court ruled that the information was protected under the Agreement for the Avoidance of Double Taxation with France and could not be disclosed to any third person or authority. The information or documents placed on record before the Magistrate by the complainant have been sought by another government Department/E.D. for the purpose of investigation. It is not the case that the information has been demanded for public dissemination; rather, it is intended solely for the purpose of conducting the investigation against the petitioner. 

The Government of India has entered into this Agreement with the French Republic, whereunder the information has been handed over to the complainant. In the event that the disclosure of information causes a violation of the Agreement’s terms, it is the Department’s responsibility to oppose it on that ground, not that of the petitioners. The Department had no objection to sharing the information for investigation, nor can such an objection be raised on its behalf in the light of the law. 

Read the Ruiling 

3. CBIC withdraws circular on evidence requirement for reversal of ITC by the recipient in post-sale discount

The CBIC has issued a circular withdrawing Circular No. 212/6/2024-GST, which had earlier prescribed a procedure for furnishing evidence of compliance with Section 15(3)(b)(ii) of the CGST Act for ITC reversal on post-sale discounts. This was stated in Circular No. 253/10/2025- GST, Dated 01-10-2025. 

The CBIC has issued a circular withdrawing Circular No. 212/6/2024-GST, dated 26-06-2024, which had provided clarifications regarding the mechanism for providing evidence of compliance with the conditions of Section 15(3)(b)(ii) of the CGST Act for reversal of ITC by the recipient in post-sale discounts. With this withdrawal, the procedure prescribed in the earlier circular for furnishing such evidence shall no longer be required. 

The circular advises field formations to ensure uniformity in implementation and requests that trade notices be issued to publicise the withdrawal. Any difficulties encountered in implementing this circular are to be reported to the Board for further guidance. 

Read the Circular 

4. CBIC introduces risk-based mechanism to provide 90% provisional GST refunds in specified cases

The CBIC has issued instructions for processing refund claims on zero-rated supplies and inverted duty structure (IDS), directing that 90% of the amount may be provisionally sanctioned based on the system-assigned risk score. This was stated in Instruction No. 06/2025 – GST, Dated 03-10-2025. 

The Central Board of Indirect Taxes and Customs (CBIC) has issued instructions regarding the processing refund applications filed on account of zero-rated supplies and inverted duty structure (IDS). For refund applications relating to zero-rated supplies, the Board has directed that 90% of the claimed refund amount may be sanctioned on a provisional basis, subject to the risk score assigned by the system. Additionally, the classification of refund applications as “low-risk” based on the system-generated risk score shall be considered during the processing of such refunds. 

The Board has further clarified that the amendment to Rule 91(2) should be applied judiciously and on a case-by-case basis, to ensure that provisional refunds are not withheld merely on presumptive grounds. 

Read the Circular 

 5. NFRA releases Interaction Series 4 on audit of accounting estimates and judgements for impairment of non-financial asset

The National Financial Reporting Authority (NFRA) issued the fourth publication in its Auditor–Audit Committee Interaction Series on 30 September 2025, focusing on impairment of non-financial assets under Ind AS 36 and the related auditing requirements under SA 540. 

This edition aims to strengthen communication between statutory auditors and audit committees, especially in areas involving judgements, estimates, and impairment testing, a key aspect of audit quality and governance oversight. 

Key Highlights 

• Impairment vs. Depreciation
  NFRA reiterates the distinction between the two concepts. Depreciation is a systematic allocation of an asset’s cost over its useful life, while impairment occurs when an asset’s carrying amount exceeds its recoverable amount (the higher of fair value less costs of disposal or value in use). Impairment is, therefore, a reassessment of asset value when indications suggest it may not be recoverable. 

• Regulatory and Reporting Framework
  The publication draws guidance from:
  a) Section 134(5) of Companies Act, 2013:  Directors must ensure accounting estimates are prudent and reflect a true and fair view.
  b) SEBI (LODR) Regulations: Audit Committees are responsible for reviewing significant accounting estimates and judgements.
  c) Ind AS 36, Impairment of Assets: Requires assessment of impairment indicators, determination of recoverable amount, and annual testing for goodwill and indefinite-life intangibles.
  d) SA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures: Mandates auditors to evaluate management assumptions and estimation processes, including fair value assessments and related disclosures. 

• Ind AS 36 framework on Impairment testing
  NFRA provides a structured approach for impairment evaluation, covering:
  a) Identification of Cash-Generating Units (CGUs): Assets are grouped into the smallest units generating independent cash inflows.
  b) Recognition of Impairment indicators: Both internal factors for example, asset obsolescence or declining performance and external factors for example, market downturns, regulatory changes.
  c) Measurement of recoverable amount: Determined as the higher of fair value less costs of disposal and value in use (present value of future cash flows).
  d) Annual Impairment testing: Mandatory for goodwill and intangible assets with indefinite useful lives, regardless of indicators. 

• Auditor’s Responsibilities under SA 540, SA 260, and SA 701
  Auditors are expected to:
  a) Assess the reasonableness and consistency of management’s assumptions, including growth rates, cash-flow forecasts, and discount rates.
  b) Perform sensitivity and scenario analyses to test the impact of changes in key variables.
  c) Evaluate whether the impairment models align with Ind AS 36 and Ind AS 113, Fair Value Measurement.
  d) Involve experts where necessary and document their evaluation in line with SA 540.
  e) Communicate significant matters to the Audit Committee, including those determined as Key Audit Matters (KAMs) under SA 701, Communicating Key Audit Matters in the Independent Auditor’s Report. 

• Audit Committee Oversight and Questions to Consider
  NFRA encourages Audit Committees to actively engage with auditors by seeking clarity on:
  a) How impairment indicators were identified and tested.
  b) Whether CGUs and goodwill allocations were consistently applied.
  c) The basis for growth and discount rate assumptions.
  d) Whether sensitivity analysis and scenario testing were performed.
  e) The rationale for impairment being (or not being) reported as a Key Audit Matter. 

Impairment testing involves significant management judgment and is vulnerable to bias. NFRA’s guidance reiterates that effective oversight and transparent auditor–audit committee dialogue are essential to ensure credible financial reporting and investor protection. 

Read the Story