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A departmental team arriving at a business premises is a situation almost no organisation has rehearsed. Decisions get taken in the first fifteen minutes — whether to allow access, what to hand over, who speaks, what gets signed — and those decisions shape everything that follows, including any proceeding that arises months later.

Section 67 of the CGST Act is the provision under which most of this happens. It is short, and its limits are more specific than is generally realised.

Inspection and search are not the same thing

The section contains two distinct powers, and conflating them is the first error.

Inspection under section 67(1) permits an officer to enter and inspect any place of business of a taxable person, or of a person engaged in transporting goods or operating a warehouse or godown. It is an examination power.

Search and seizure under section 67(2) is wider. It permits an officer to search a place and to seize goods, documents, books or things found there. It is available where the officer has reason to believe that goods liable to confiscation, or documents or things useful to or relevant for proceedings, are secreted in a place.

Both require a threshold to be crossed. Under section 67(1), an officer not below the rank of Joint Commissioner must have reasons to believe that a taxable person has suppressed a transaction, claimed input tax credit in excess of entitlement, contravened a provision to evade tax, or that a transporter or warehouse-keeper has kept accounts in a manner likely to cause evasion. Under section 67(2), a similar threshold must be satisfied before authorisation for search is given.

The distinction between an inspection and a search matters practically because it determines what may be taken away. An inspection does not, of itself, authorise seizure.

Where the visit is described as an audit or a verification rather than an inspection or search, different provisions apply altogether — see our note on the difference between a GST audit and an inspection.

The authorisation is the starting point

Neither power is exercisable at will by any officer. The authorisation is issued in FORM GST INS-01 by an officer not below the rank of Joint Commissioner, and it identifies the premises and the officer authorised to act.

This is the first document to ask for, and asking for it is not obstruction. It is the instrument that confers the power, and the person in charge of the premises is entitled to see it and to record its particulars — the number, the date, the issuing officer, the premises specified and the names of the officers authorised.

Two points follow. An authorisation is premises-specific; it does not travel to a different location. And “reasons to believe” is a legal standard, not a formality — it must exist, and it must be recorded, though the recorded reasons are not ordinarily furnished at the time.

What may be seized, and what may not

Section 67(2) permits seizure of goods liable to confiscation, and of documents, books or things which in the officer’s opinion will be useful for or relevant to any proceedings under the Act.

Where it is not practicable to seize the goods, the officer may instead serve an order in FORM GST INS-03 on the owner or custodian, directing that the goods not be removed, parted with or otherwise dealt with without prior permission. This is a prohibition order rather than a seizure, and it leaves the goods where they are.

The seizure itself is recorded in an order in FORM GST INS-02, and the goods and documents seized are listed in an inventory. That inventory is the single most important document generated during the proceeding. It should be read before it is signed, it should be specific rather than generic — “one laptop” is not an adequate description where the contents matter — and a copy should be obtained.

Where documents or books are seized, section 67(5) entitles the person from whose custody they were seized to make copies of or take extracts from them, in the presence of an authorised officer, except where doing so would prejudicially affect the investigation. This entitlement is frequently not exercised, and a business that parts with its only copy of a ledger without taking extracts creates avoidable difficulty for itself.

A seizure is frequently followed by a notice, and our note on the types of GST notices sets out what may arrive next.

Sealing, breaking open and access to records

Section 67(4) is the provision most likely to escalate a situation, and its scope is worth knowing precisely.

An officer authorised under section 67(2) may seal or break open the door of any premises where access is denied, and may break open any almirah, electronic devices, box or receptacle where access to it is denied and it is suspected to contain goods, accounts, registers or documents.

The power is conditioned on access being denied. It is not a power exercisable in the first instance. This is precisely why refusing entry is rarely a sensible response: it does not prevent access, and it converts a cooperative proceeding into a contested one, with consequences that carry into the record.

The corresponding obligation on the business is straightforward — provide access to the premises, to records and to systems as required by the authorisation, and record what was provided.

Rights that exist during the proceeding

Section 67(10) applies the provisions of the Code of Criminal Procedure relating to search and seizure to searches under the section, subject to modification. The practical consequences include the following.

Witnesses. A search is conducted in the presence of independent witnesses, and the proceedings are recorded in a panchnama. The person in charge should note who the witnesses were.

Timing. Searches are conducted with regard to the requirements applicable under the Code, and the record should reflect the time of commencement and conclusion.

A copy of the record. The person from whose premises documents or goods are seized is entitled to a copy of the seizure order and the inventory.

Presence of a representative. There is no bar on the presence of an advocate or an authorised representative at the premises. Their attendance does not suspend the proceeding, and officers are not obliged to wait indefinitely, but a business is entitled to summon assistance and should do so early rather than late.

Signing. Every document signed during a search — the panchnama, the inventory, any statement — becomes part of the record and is difficult to resile from later. Documents should be read before signature, and any inaccuracy should be corrected on the face of the document at the time, not raised afterwards.

Time limits on seized goods

Section 67(7) contains a limit that is frequently overlooked by the parties it protects.

Where goods are seized under section 67(2) and no notice is issued within six months of the seizure, the goods shall be returned to the person from whose possession they were seized. That period may be extended, for sufficient cause, by a further period not exceeding six months, by the proper officer.

The obligation is on the department, but the entitlement belongs to the business, and it does not enforce itself. Where six months have passed without a notice and without a recorded extension, the position should be raised in writing.

Section 67(8) allows goods of a perishable or hazardous nature, or goods subject to depreciation in value, or for other prescribed reasons, to be disposed of before the conclusion of proceedings, subject to the prescribed procedure.

Where the obligation is not met, the position should be raised in writing before considering the wider remedies against a wrongful order.

Provisional release

Seized goods need not remain in departmental custody while the matter is worked out.

Section 67(6) permits goods seized under section 67(2) to be released on a provisional basis, upon execution of a bond and furnishing of security in the prescribed manner and quantum, or on payment of the applicable tax, interest and penalty. The bond is in FORM GST INS-04, and where the department later releases the goods after the bond is executed, the order is in FORM GST INS-05.

For a business whose stock is its working capital, provisional release is often the most urgent step of all, and the application should be made promptly with a clear valuation and the security offered.

Statements recorded during a search

Statements are frequently recorded during or immediately after a search, sometimes from employees who are not in a position to speak to the matters they are asked about.

Three practical observations, none of which involve obstruction:

Answer from the record, not from memory. Where a figure or a transaction is asked about, the correct answer is often that the position will be confirmed from the records, rather than an approximation that later turns out to be wrong and has to be explained.

A statement is evidence. It carries weight in any proceeding that follows, and inconsistencies between an early statement and the documents are precisely what an adjudicating authority focuses on.

Read before signing, and take a copy. A statement recorded and signed without a copy retained is a document the business cannot check its later submissions against.

Summons for the recording of evidence is a separate power under section 70, and is governed by its own requirements.

Inconsistency between an early statement and the documents is among the most damaging things that can surface in later tax litigation.

Section 128A offered something GST had not offered before: a waiver of interest and penalty on demands for the earliest years of the tax, on condition that the tax itself was paid. A large number of businesses took it up, paid, withdrew their appeals and applied.

The application window has since closed. What remains live is the aftermath — orders being issued, applications being rejected, and appeals that were withdrawn as a condition of applying now needing to be brought back. That aftermath is where the real difficulty lies, and it is much less written about than the eligibility rules were.

What the scheme did

Section 128A was inserted by the Finance (No. 2) Act, 2024 with effect from 1 November 2024. The procedure was prescribed by Notification No. 20/2024-Central Tax dated 8 October 2024, which inserted Rule 164, and explained in Circular No. 238/32/2024-GST.

The scheme was deliberately narrow:

• It applied to demands under section 73 — that is, cases not involving fraud, wilful misstatement or suppression. Demands under section 74 were outside it. Our note on the difference between sections 73 and 74 explains why that distinction carries so much weight.
• It covered three financial years only: 2017-18, 2018-19 and 2019-20.
• It reached three situations: a notice or statement issued with no order yet passed; an order passed with no first-appellate decision yet; and an appellate order with the matter not yet before the Tribunal.
• The relief was waiver of interest and penalty. The tax was payable in full.

The bargain, in short, was: pay the tax, keep the interest and the penalty.

The windows, and the fact that they have closed

Two dates governed the scheme, and both are now historical.

Payment of the tax had to be made by 31 March 2025.

The application — in FORM GST SPL-01 where a notice or statement had been issued and no order passed, or FORM GST SPL-02 where an order under section 73(9) had been passed — had to be filed within three months of that date, which is to say by 30 June 2025. A longer period of six months from communication of the order applied in the limited situation of a demand recast under section 75(2).

Because both windows have closed, the scheme is no longer a planning option. A business that did not apply cannot now do so, and a demand for those years that was not brought within the scheme is dealt with through the ordinary appellate route.

What continues is the processing of applications already made, and the consequences that follow.

SPL-05: approval and what it concludes

Where the proper officer is satisfied that the conditions are met, the application is allowed by an order in FORM GST SPL-05, and the proceedings are concluded.

Two points about the scope of that conclusion are worth stating plainly, because they are frequently misread.

It concludes the proceedings, not the period. An SPL-05 order concludes the specific demand to which the application related. It does not immunise the taxpayer against a different demand for the same year on a different issue, nor against proceedings under section 74 if the ingredients of that section are made out on other facts.

It does not refund anything already paid. Interest and penalty already paid before the application were not refundable under the scheme. The waiver operated on amounts unpaid, not on amounts recovered.

Where an SPL-05 has been received, the file is closed but should be kept complete — the application, the payment challans, the withdrawal of the appeal and the order itself. That set of documents is the answer if the same period is picked up again in a later verification.

The documents should be filed with the rest of that year’s GST compliance records.

SPL-07: rejection, and the two routes out

Where the officer is not satisfied, the application is rejected by an order in FORM GST SPL-07. This is the point at which the scheme becomes complicated, because the applicant is now in a worse position than before: the appeal has been withdrawn, and the waiver has been refused.

Rejections commonly turn on:

• Shortfall in the tax paid — a computation difference, or payment against the wrong period or head.
• Payment after 31 March 2025.
• The demand not being a section 73 demand, or covering periods outside the three eligible years.
• The appeal not having been withdrawn, or the withdrawal not being evidenced.
• Part of the demand falling outside the scheme, where an order covers a mixed period or mixed grounds.

Two routes follow from an SPL-07, and the choice between them has to be made deliberately.

Appeal against the rejection. An SPL-07 order is appealable to the Appellate Authority in the ordinary way. This is the route where the applicant maintains that the conditions were satisfied and the officer was wrong — for example, where the payment was in fact made in time, or where the demand was properly a section 73 demand.

Accept the rejection and restore the original appeal. Where the applicant concludes that the rejection is correct, or that contesting it is not worth the time, the original appeal against the underlying demand can be revived. That is what Form GST SPL-08 is for.

Both routes run through the ordinary forums described in our note on the GST appeal structure.

SPL-08 and restoration of a withdrawn appeal

The scheme required an applicant to withdraw any pending appeal before, or at the same time as, applying. That withdrawal was the price of admission — and it created an obvious risk: a taxpayer who withdrew an appeal and was then refused the waiver would otherwise be left with no remedy at all against a demand that had become final.

The rules address this. Where an application is rejected by an SPL-07 and the applicant does not pursue a further appeal against that rejection, an undertaking in FORM GST SPL-08 filed within three months restores the original appeal, which is then treated as never having been withdrawn.

Three things follow, and they are all time-sensitive:

1. The three-month period runs from the rejection. It is not open-ended, and it is easy to lose while a decision is being taken about whether to appeal the rejection instead.
2. The two routes are alternatives. SPL-08 restoration is available where a further appeal against the rejection is not filed. Choosing to appeal the SPL-07 and then changing course later is not a safe plan.
3. Restoration revives the appeal as it was. The original grounds, the original pre-deposit and the original record come back. It does not create an opportunity to reframe the case.

The appeal-withdrawal trap

The single most damaging error in this area is procedural rather than substantive: withdrawing the appeal without preserving proof of the withdrawal and its date, or withdrawing it in a way the appellate authority does not record.

If an application is later rejected on the ground that the appeal was not withdrawn, and the applicant cannot produce the withdrawal, the taxpayer is caught between two forums — refused the waiver for not withdrawing, and unable to demonstrate that the appeal survives. The documents that avoid this are the withdrawal application, the acknowledgement of it, and any order recording it.

The same discipline applies to the payment. Challans should be identified by period and by head, and the payment should be traceable to the specific demand covered by the application.

A taxpayer caught between the two forums is in the worst position available in tax litigation: refused relief in one, and unable to demonstrate a surviving appeal in the other.

What the scheme never covered

For completeness, because the misunderstanding persists:

• Section 74 demands — fraud, wilful misstatement, suppression — were excluded throughout.
• Erroneous refunds were outside the relief.
• Years other than 2017-18 to 2019-20 were never covered, and the scheme was not extended to later years.
• Tax was never waived. Only interest and penalty were.
• Amounts already paid by way of interest or penalty were not refundable.

A demand for FY 2020-21 or later, or a section 74 demand for any year, was always dealt with under the ordinary appellate structure, and still is.

Those demands are contested through the ordinary remedies against a wrongful demand order.

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Before a GST appeal is heard on its merits, it has to be paid for. Not in fees, which are modest, but in a statutory deposit against the demand itself. For a business deciding whether to appeal, this is usually the first number the board asks for — and it is frequently miscalculated, in both directions.

Getting it wrong at the low end means the appeal is defective and limitation continues to run while the defect is cured. Getting it wrong at the high end means cash is parked with the department for years when it did not have to be.

Why the pre-deposit is the first question

The pre-deposit is not a filing formality. It is a statutory condition on the right of appeal, and it does two things at once: it fixes the amount the appellant must fund up front, and it triggers the protection against recovery of everything else.

That second point is what makes the calculation worth doing carefully. Under section 112(9), once the amount required by section 112(8) has been paid, recovery of the balance is deemed to be stayed until the appeal is decided. A correctly computed pre-deposit converts a live demand into a suspended one. An incorrectly computed one leaves the whole demand recoverable.

It is also the first number that shapes the commercial decision whether to carry a matter into tax litigation at all.

The two-stage structure

The GST scheme spreads the deposit across the two appellate stages. It is cumulative, not repeated.

In each case, the deposit on the disputed portion is in addition to payment in full of the amount the appellant admits. Section 107(6) and section 112(8) both open with the requirement to pay the admitted tax, interest, fine, fee and penalty in full. The percentage applies only to what remains in dispute.

The figures were not always these. The tribunal-stage deposit under section 112(8) originally stood at 20 per cent of the remaining disputed tax. It was reduced to 10 per cent with effect from 1 November 2024, alongside a reduction in the caps. Commentary written before that change, and calculators built to it, will over-state the requirement — which is precisely the error that leaves money sitting with the department.

The stages themselves are set out in our note on the GST appeal structure.

The base: what “disputed tax” means

The percentage is applied to the tax in dispute. It is not applied to interest, and it is not applied to penalty, where a tax demand exists.

This matters because GST orders routinely bundle tax, interest and penalty into a single figure, and the summary in FORM GST APL-04 presents a consolidated demand. Computing 10 per cent of the consolidated number rather than of the tax component alone is the single most common over-payment in this area.

Two further refinements:

Only the disputed portion counts. Where an order covers several issues and the appellant accepts some, the accepted tax is paid in full and the percentage applies only to the issues carried into appeal. Framing the appeal narrowly therefore reduces the deposit, though that is a reason to think about the appeal’s scope, not to abandon good grounds.

CGST and SGST are separate. A demand under an intra-State supply generates parallel central and State demands. The deposit is computed and paid under each head, and the caps apply to each head separately.

A worked illustration. An order confirms tax of ₹1 crore, interest of ₹40 lakh and penalty of ₹1 crore. The appellant accepts ₹20 lakh of the tax and disputes the balance of ₹80 lakh.

• Admitted tax of ₹20 lakh, with the interest and penalty referable to it, is paid in full.
• At first appeal, 10 per cent of ₹80 lakh — ₹8 lakh.
• At the tribunal stage, a further 10 per cent of ₹80 lakh — ₹8 lakh.
• Total deposited on the disputed portion across both stages: ₹16 lakh, being 20 per cent of ₹80 lakh.

The interest of ₹40 lakh and the penalty of ₹1 crore attributable to the disputed portion do not enter the computation at all, and recovery of them is covered by the deemed stay once the tribunal-stage deposit is made.

The caps

The statute caps the deposit in absolute terms so that very large demands do not make the right of appeal illusory.

Following the amendments effective 1 November 2024, the cap at each stage is ₹20 crore under the CGST Act and ₹20 crore under the SGST Act. The tribunal-stage cap was reduced from ₹50 crore to ₹20 crore by the same amendment.

For all but the largest demands the cap is academic; the percentage bites first. For a demand where it does apply, the saving is substantial and it is worth checking rather than assuming.

Penalty-only orders

A recurring difficulty was what to deposit when an order imposes no tax at all — for example a penalty under the detention and seizure provisions, or a penalty for a procedural contravention. If the base is disputed tax and there is no tax, is the deposit nil, or is the appeal simply unaffordable?

This was addressed by amendment, and Notification No. 16/2025-Central Tax brought the relevant provision into force with effect from 1 October 2025, prescribing a deposit of 10 per cent of the penalty in dispute for tribunal appeals where the order involves no tax demand.

There is an important qualification on timing. The Tribunal has taken the view that this amendment operates prospectively, so that appeals arising out of proceedings initiated before the amendment came into force are not subjected to the penalty pre-deposit requirement. Where an appeal arises from an older penalty-only order, the applicable position should be examined by reference to the date of the underlying proceeding rather than the date of filing.

What the pre-deposit buys you

Three things, and it is worth being clear that it does not buy a fourth.

Admission of the appeal. Without it, the appeal is not properly constituted.

A statutory stay of recovery. Under section 112(9), recovery of the balance is deemed stayed until disposal. No separate stay application is required.

Protection against coercive measures for the balance while the appeal is pending — attachment, garnishee notices to customers and banks, and recovery from third parties holding money for the appellant.

What it does not buy is a stay of any registration consequence flowing from a separate proceeding, or protection against demands for other periods that are not before the Tribunal. Each period and each order stands on its own footing.

On the mode of payment, the question of whether the deposit may be made from the electronic credit ledger rather than in cash has been the subject of litigation and judicial clarification; our note on paying pre-deposit through the credit ledger deals with that question separately.

Getting it back

The deposit is not a payment of tax. It is a security, and where the appellant succeeds it is refundable.

On a favourable order, the amount deposited becomes refundable, and section 115 provides for interest on the refund of an amount deposited under section 107(6) or section 112(8) where the order is set aside, from the date of payment until the date of refund, at the notified rate.

On a remand, the position needs care. An order setting aside a demand and remanding the matter for fresh adjudication does not always result in an immediate refund, because the demand may be revived on fresh adjudication. What the appellant does with the deposit in that situation depends on the terms of the remand order.

On a partial success, the deposit is applied against the confirmed portion and the balance is refundable.

Two practical points. First, refund is not automatic in every case; the appropriate application should be made and pursued, and the appellate order relied on. Our note on GST refund claims covers the mechanics of the refund process generally. Second, the entitlement to interest under section 115 is frequently overlooked in the refund application itself, and an application that does not claim it tends not to receive it.

Five computation errors

1. Applying the percentage to the consolidated demand rather than to the tax component alone.
2. Using the pre-November 2024 figures — 20 per cent at the tribunal stage, or a ₹50 crore cap.
3. Paying the tribunal-stage deposit as a fresh 10 per cent of the whole demand rather than recognising that the first-appeal deposit is part of the cumulative 20 per cent.
4. Ignoring the admitted portion. The admitted tax, and the interest and penalty referable to it, must be paid in full and separately; it is not covered by the percentage.
5. Depositing under the wrong head or period. An amount sitting in the ledger against the wrong minor head or the wrong tax period is not proof of the deposit for the appeal in question, and correcting it costs time that limitation does not allow.

The last of these is a record-keeping failure rather than a legal one, and it is avoided by the same ledger discipline that routine GST compliance requires.

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For seven years, a taxpayer who lost before the first appellate authority under GST had nowhere ordinary to go. The Appellate Tribunal contemplated by section 109 was not constituted, and the only route left was a writ petition — a discretionary remedy, not an appeal. Demands accumulated, recovery was contested case by case, and High Courts absorbed work that was never meant to reach them.

That gap has closed. The Goods and Services Tax Appellate Tribunal is functioning, with a Principal Bench in New Delhi and State Benches operating across the country, and appeals are filed electronically.

The position in September 2026 is different from the position even a few months ago, in one important respect: the transitional window for the accumulated backlog has expired. Anyone writing or reading about GSTAT filing needs to start from that fact rather than from the guidance published during the backlog rush.

Where the Tribunal sits in the chain

The GST appellate structure runs in a fixed sequence, and each stage has its own limitation and its own pre-deposit:

The Tribunal is a fact-finding forum. Unlike the High Court, which under section 117 entertains appeals only on a substantial question of law, the Tribunal can examine the evidence, the reasoning and the record. That makes it the last stage at which findings of fact can realistically be reopened, and it is the reason a well-built factual record at this stage matters so much.

Our note on the GST appeal structure sets out how the stages fit together.

The backlog window and why it matters that it has closed

Because the Tribunal was not available for years, a large body of first-appeal orders was passed without any onward remedy. Ordinary limitation under section 112 could not have been complied with for those orders, since there was no Tribunal to file before.

The Government dealt with this by notification. S.O. 4220(E) dated 17 September 2025, issued under section 112(1) read with section 112(3), fixed a date by reference to which the limitation for those accumulated orders would run, setting 30 June 2026 as the outer date for filing appeals against orders communicated before 1 April 2026. That date was subsequently extended to 31 July 2026.

Both dates have now passed. The backlog window is closed, and appeals against pre-April 2026 orders no longer have the benefit of the special dispensation. A great deal of the commentary published during the first half of 2026 was written to that deadline and should be read with its date in mind.

How limitation runs now

For orders communicated on or after the notified date, the ordinary rule applies, and it is short.

Section 112(1) requires an appeal to be filed within three months from the date on which the order is communicated to the person preferring the appeal. Communication, not the date the order bears, is the trigger. For orders uploaded to the common portal, the date of uploading is ordinarily treated as the date of communication, and the day of receipt is excluded from the computation.

Section 112(3) gives the department six months to file against an order, reflecting the time taken for internal review and authorisation.

Section 112(6) allows the Tribunal to admit an appeal filed after the three-month period, for a further period of up to three months, where it is satisfied that there was sufficient cause for not presenting it in time. This is a discretion, not an entitlement. It has to be invoked by a properly supported application, and a bare assertion that the order was overlooked does not meet the standard.

Three months plus three condonable months is therefore the practical outer limit within the statutory scheme.

Limitation at the notice stage runs differently again, and is dealt with in our note on timelines for responding to a GST notice.

If the backlog window was missed

This is now the live question for a good number of taxpayers, and it does not have a single answer.

Where the order falls within the condonable extension. If the delay is still within the additional period the Tribunal may condone, an application under section 112(6) supported by an affidavit setting out the reasons is the ordinary course. The application should explain the delay day by day rather than in general terms, and should attach whatever supports it — the date the order was actually seen, illness, change of authorised representative, portal issues evidenced contemporaneously.

Where the delay exceeds what section 112(6) permits. The Tribunal is a creature of statute and its power to condone is bounded by the section. Where the delay falls outside it, the appeal route is not available in the ordinary way, and the question becomes whether the High Court’s writ jurisdiction can be invoked — typically on grounds going to the validity of the order itself, a breach of natural justice, or jurisdictional error, rather than on the merits of the demand. That is a materially harder route with a materially lower success rate, and it turns entirely on the facts.

Other remedies that may still be open. Depending on the nature of the defect, rectification of an error apparent on the face of the record under section 161 may be available within its own timeline, and in some cases the order under challenge may itself be vulnerable for want of a hearing. Our note on remedies against a wrongful demand order deals with these more generally.

The practical lesson is unglamorous: appellate limitation under GST is short, it runs from communication rather than from awareness, and the portal is the place where communication happens. A business that does not monitor the portal is running a limitation risk it cannot see.

Each of these routes is a distinct branch of tax litigation, and the choice between them turns entirely on the facts.

What filing actually involves

Filing is fully electronic through the Tribunal’s e-filing portal at efiling.gstat.gov.in. There is no physical presentation of the appeal.

FORM GST APL-05 is the appeal itself. It carries the statement of facts, the grounds of appeal and the prayer. The grounds are not a summary of the argument; they are the pleading that defines what the Tribunal will decide, and grounds not taken are difficult to introduce later.

FORM GST APL-02A is the verification generated and submitted before final submission of the appeal.

Alongside the form, the record ordinarily requires the certified copy of the order appealed against, the summary of the order in FORM GST APL-04, proof of the pre-deposit, the authorisation under which the appeal is filed — a board resolution or a partnership authorisation as the case may be — and a vakalatnama where an advocate appears. Documents not in English require a translation supported by an affidavit.

The documents that get appeals rejected

Defects at the filing stage cause more difficulty than they should, because they consume limitation while they are being cured. The recurring ones:

• No certified copy of the impugned order, or a downloaded copy where certification is required.
• Authorisation that does not match the appellant. A resolution authorising a person who has since left, or one that authorises representation generally without covering the filing of an appeal.
• Pre-deposit paid under the wrong head. Payment made against the wrong minor head, or against the wrong period, is not a defect in the amount but it is a defect in the proof.
• Grounds drafted as narrative. Grounds that recite history rather than identifying the specific error in the order below give the Tribunal nothing to rule on.
• Missing translations for annexures in a regional language.
• Inconsistency between the tax period in the appeal and the period in the order — surprisingly common where a single order covers multiple periods.

Most of these are avoided by the same record-keeping discipline that ordinary GST compliance already requires.

Automatic stay on recovery

One of the most practically valuable features of section 112 is sub-section (9). Where the appellant has paid the amount required under section 112(8), recovery proceedings for the balance amount are deemed to be stayed until the appeal is disposed of.

This is a statutory stay. It does not require a separate application or an order, and it operates on payment of the prescribed pre-deposit. Its effect is that bank attachment, garnishee notices to debtors and coercive recovery for the balance should not proceed while the appeal is pending. Where recovery is nonetheless attempted, the proof of pre-deposit and the acknowledged appeal are the answer.

The pre-deposit itself — how much, on what base, and what happens to it — is dealt with separately in our note on computing the pre-deposit for a GSTAT appeal.

Departmental appeals

Appeals are not only filed by taxpayers. Where the department is aggrieved by a first-appellate order, it may appeal under section 112(3) within six months, subject to the review and authorisation process and to the monetary limits fixed for departmental litigation.

A taxpayer who has succeeded in first appeal should therefore not treat the matter as closed until the departmental appeal period has run. Where a departmental appeal is filed, the respondent taxpayer may also file cross-objections within the prescribed period, and doing so preserves points that were decided against the taxpayer even though the overall outcome was favourable.

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Most income tax notices sent to individuals now begin the same way: a figure in a departmental statement does not match a figure in the return. No allegation, no investigation — just an arithmetic difference between what a bank, registrar, depository or employer reported and what the taxpayer declared.

A large proportion of those differences are not errors by the taxpayer at all. They are reporting artefacts. And nearly all of them can be dealt with before a return is even filed, using a facility that most taxpayers never open.

Three statements, three different jobs

The three documents are routinely treated as versions of the same thing. They are not.

Form 26AS is a tax credit statement. Its core function is to record tax deducted at source, tax collected at source, advance tax and self-assessment tax paid, and refunds issued. It answers the question: how much tax has already been paid or credited against my PAN?

The Annual Information Statement (AIS) is far broader. It is a consolidated record of financial information reported to the department about a taxpayer from many sources — interest paid by banks, dividends, securities and mutual fund transactions, foreign remittances, property purchases and sales, business receipts, GST turnover, and other specified financial transactions. It answers a different question: what does the department know about my financial year?

The Taxpayer Information Summary (TIS) is a category-wise summary derived from the AIS. For each category it shows a processed value and a derived value. The derived value is what feeds the return pre-fill, and it is the figure that shifts when feedback is accepted.

Three consequences follow. A transaction can appear in the AIS without appearing in Form 26AS, because no tax was deducted on it. Two statements can show different numbers for what looks like the same thing without either being wrong. And correcting the AIS is what changes the TIS, which is what changes the pre-filled return — not the other way round.

Together they form the department’s view of a taxpayer’s year, and reading all three is now a basic step in income tax compliance in India.

Why the numbers disagree

The AIS aggregates data supplied by third parties under statutory reporting obligations. Those parties report on their own systems, on their own timelines, and to their own conventions. The taxpayer’s books follow accounting rules and the taxpayer’s own facts. The two were never designed to reconcile exactly.

Some divergence is therefore expected and entirely proper. The task is not to make every figure match, but to identify the differences that would look like under-reporting to a reviewer and to explain them on record before anyone asks.

The most common causes of a mismatch

Gross against net. Banks report interest credited gross. The taxpayer may have offered it net of something, or offered only the amount actually received. Similarly, sale consideration on securities is reported gross of brokerage and charges.

Accrual against receipt. Interest on a cumulative deposit accrues each year but is received at maturity. A taxpayer offering interest on receipt will show nothing for the intervening years while the AIS shows accrual for each. Both approaches can be defensible; the mismatch is the predictable consequence of the choice.

Joint holders. A fixed deposit, a property or a demat account in joint names is frequently reported in full against the first holder’s PAN. The second holder’s share, and the beneficial ownership between them, is not visible to the reporting entity.

Duplicate reporting. The same transaction reported by more than one entity — a mutual fund transaction reported by both the fund and the registrar, or a property transaction reported by both the registrar and the bank financing it.

Sale consideration against stamp duty value. Property transactions are reported by reference to the value recorded by the registering authority, which may exceed the actual consideration.

Wrong PAN. A reporting entity attributes a transaction to the wrong PAN. This is the mismatch that most alarms taxpayers, because the transaction is genuinely not theirs.

Timing at the year boundary. A payment credited on 31 March and received on 2 April sits in different years for the two parties.

Turnover figures. GST turnover reported in the AIS is derived from GST returns and is computed on GST principles. It will not equal turnover as reported in the financial statements or as offered under the income tax provisions, and it is not meant to.

Property and securities entries are the ones most often misread, and our note on capital gains and exemptions covers how the gain itself is computed.

The feedback mechanism and the seven options

The AIS carries a feedback facility that lets a taxpayer respond to each item of information. This is the part of the system that is under-used, and it is the whole point of the design.

Against any reported item, the taxpayer may record that the information is:

1. Correct — accepted as reported.
2. Not fully correct — partly right; the correct particulars are supplied.
3. Relates to other PAN or year — the transaction belongs to someone else or to a different period, and the correct PAN or year is given.
4. Not applicable / duplicate — the same transaction has been reported more than once.
5. Denied — the transaction did not occur.
6. Income is not taxable — the receipt is real but does not form part of taxable income.
7. Customised feedback — for categories where the specific facts require a tailored response.

The exact labelling varies a little by information category, and the portal displays the options available for the item in question. The substance is consistent: the taxpayer can put the correct position on record item by item, with an explanation.

Feedback can be submitted online item by item, or through the downloadable utility where the volume is large — which it often is for a taxpayer with an active trading account.

What happens after you submit feedback

Two things happen, and the distinction matters.

First, the AIS immediately displays a modified value alongside the reported value, showing both what was reported and what the taxpayer says. Nothing is deleted; the record shows the disagreement.

Second, the TIS derived value is recomputed to reflect the feedback, and that derived value is what flows into the pre-filled return.

Where the feedback denies or materially alters what a reporting entity has said, the information may be referred back to that entity for confirmation. The reporting entity may accept the correction and file a revised statement, in which case the AIS updates at source, or it may stand by what it reported, in which case the disagreement remains visible on both sides.

The important point is that the taxpayer’s position is timestamped and on record before the return is filed. When a query comes later, the answer is not being constructed after the event.

The e-campaign, and why silence is costly

Where the department’s analytics flag a significant difference between reported information and the return — or where a return has not been filed at all despite significant reported transactions — a message is issued under the e-campaign facility on the compliance portal. This is not a notice. It is an invitation to respond, and it is the cheapest stage at which a difference can be resolved.

A taxpayer who responds with an explanation and supporting particulars usually ends the matter there. A taxpayer who ignores it moves the same difference into a stage where it is dealt with by formal notice, with the consequences that follow. Our note on what to do on receiving an income tax notice covers that later stage.

When feedback is not enough

Feedback corrects the department’s information record. It does not correct a return.

If the return has not been filed, resolve the AIS position first and then file, so that the return and the statement tell the same story.

If the return has been filed and understated income, feedback alone will not cure it. Depending on the timing, a revised return or an updated return under the facility for that purpose may be available. An updated return carries additional tax, and the additional amount increases the longer it is left.

If an intimation proposing an adjustment has already been issued, the response is made in that proceeding, within the time allowed. Feedback on the AIS may support the response but does not replace it.

If the transaction is genuinely not yours — a wrong PAN attribution — record the denial in the feedback, retain evidence of the position, and expect that the item may persist while the reporting entity is asked to confirm. Keep the correspondence.

Beyond that point the matter moves from correspondence into tax litigation, which is a slower and more expensive way to resolve the same difference.

A pre-filing sequence that works

For most individual taxpayers, twenty minutes before filing prevents months of correspondence afterwards:

1. Download Form 26AS, the AIS and the TIS for the year.
2. Reconcile tax credits from Form 26AS against the deductions claimed in the return, deductor by deductor.
3. Read the AIS category by category, not as a total. Interest, dividend, securities, property and remittances are where differences cluster.
4. For every difference, decide whether it is a reporting artefact or a genuine omission on your side.
5. Submit feedback on the artefacts, with the correct particulars.
6. Fix the omissions in the return.
7. Save the AIS, the TIS and the feedback acknowledgement for the year alongside the return, so the file is complete.

The sequence applies whatever the taxpayer category, though the categories that generate the most AIS entries are set out in our note on return filing across taxpayer categories.

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Every business that pays money out of India eventually meets section 195. It applies to software licences, professional fees, group recharges, royalties, interest, commission, dividends and a long list of other payments. It is also one of the provisions where a mistake is expensive in two directions at once: the payer loses the deduction for the expenditure, and separately becomes liable for the tax it should have withheld.

The difficulty is rarely the rate. It is the analysis that precedes the rate.

The question that comes first

Section 195 requires deduction from any sum paid to a non-resident which is chargeable to tax in India. Those five words carry the whole provision. If the sum is not chargeable to tax in India, there is nothing to deduct.

Chargeability is determined by reading the domestic law and the applicable tax treaty together. A payment for the purchase of goods from an overseas supplier is ordinarily not chargeable to tax in India in the supplier’s hands, and no deduction arises. A payment characterised as royalty or fees for technical services may be chargeable even though the recipient has no presence in India at all. A payment that would be business profits under a treaty is generally taxable in India only if the recipient has a permanent establishment here.

So the sequence is:

1. Characterise the payment. What is actually being paid for — goods, services, the use of a right, the use of equipment, interest, a reimbursement?
2. Test chargeability under domestic law. Does it accrue or arise in India, or is it deemed to?
3. Test chargeability under the treaty, if one applies and is beneficial. The taxpayer may adopt whichever of the domestic law and the treaty is more favourable.
4. Only then, determine the rate and whether surcharge and cess apply.

Skipping to step four is the most common error we see in this area. Our note on how a DTAA operates sets out the treaty framework in more detail.

What section 195 actually requires

Deduction is required at the time of credit of the sum to the account of the payee or at the time of payment, whichever is earlier. Credit to a suspense account or any other account is treated as credit to the payee’s account, which means an accrual entry at year end can trigger the obligation even though no money has moved.

The person responsible for paying is the deductor. There is no turnover threshold and no minimum amount; an individual remitting a taxable sum abroad is within the section just as a company is.

The rate is the rate in force for the relevant category of income, as modified by the treaty where the treaty is beneficial and the conditions for claiming it are satisfied. Where the recipient has not furnished a PAN, the provision dealing with failure to furnish PAN can apply, subject to the relief available where the prescribed alternative details and documents are furnished.

Unlike most other withholding provisions in Indian income tax compliance, section 195 has no threshold and no minimum amount.

Form 15CA and Form 15CB

These two forms are the reporting mechanism that sits around section 195. They are frequently described as though they impose the tax. They do not — they report a remittance and record the basis on which withholding was or was not applied.

Form 15CA is furnished by the remitter on the e-filing portal. It has four parts, and the part that applies depends on the amount and on whether an order or certificate has been obtained:

Form 15CB is a certificate from a chartered accountant recording the nature of the remittance, the provision under which it is taxable, the treaty article relied on if any, the rate applied and the basis for it. It is required where Part C applies.

The authorised dealer bank will ordinarily not process the remittance without the relevant acknowledgement. That commercial gatekeeping is why these forms attract so much attention, but it is worth keeping the hierarchy straight: the withholding obligation arises from section 195; the forms record how it was discharged.

When no form is required

Rule 37BB prescribes a list of remittances for which Form 15CA and Form 15CB are not required. The list runs to a number of specified purposes and includes categories such as indemnity payments, imports in specified circumstances, remittances by individuals under the Liberalised Remittance Scheme for certain purposes, payments for travel and education in specified cases, and remittances by the Government.

Two cautions apply. First, the list is by purpose code, and the purpose code has to genuinely describe the payment. Second, exemption from the reporting requirement is not exemption from section 195. A remittance may fall outside the form requirement and still be a sum chargeable to tax from which deduction was required.

The treaty documents that decide the rate

Where a beneficial treaty rate is claimed, the documents matter as much as the analysis. The department’s position, and the position taken in assessments, is that the conditions for treaty entitlement must be established at the time of the remittance rather than reconstructed later.

The usual set is:

• Tax Residency Certificate issued by the tax authority of the other country, for the relevant period.
• Form 10F, which supplies the particulars not contained in the TRC. This is now filed electronically on the e-filing portal, and a non-resident without a PAN follows the prescribed route for registration and filing.
• A no permanent establishment declaration, where the treaty article relied on requires the absence of a PE — typically for business profits, and often for fees for technical services under treaties with a make-available or PE-linked condition.
• Beneficial ownership confirmation, where the treaty article for interest, royalties or dividends conditions the reduced rate on beneficial ownership.

A file that contains the analysis but not the documents tends to fail at assessment. A file that contains the documents but no analysis tends to fail on characterisation. Both are needed.

Characterisation and treaty entitlement are among the most frequently contested issues in cross-border tax litigation.

The certificate route under sections 195(2), 195(3) and 197

Where the whole of a payment is not income, or where the appropriate rate is lower than the rate that would otherwise apply, waiting for a refund is a poor outcome. Three routes exist:

Section 195(2) allows the payer to apply to the Assessing Officer for a determination of the appropriate proportion of the sum chargeable to tax. This is the route where, for example, a composite payment includes a substantial non-taxable element.

Section 195(3) allows the recipient, in prescribed circumstances, to apply for receipt without deduction.

Section 197 allows the recipient to apply for a certificate authorising deduction at a lower rate or nil rate. The application is made electronically and is supported by computations, the return history and the basis on which the lower rate is justified.

These applications take time and are best initiated well before the payment is due. A certificate obtained after the remittance does not cure a failure to deduct at the time of the remittance.

Grossing up

Where a contract provides that the non-resident is to receive a sum free of Indian tax, the tax borne by the payer is itself treated as income, and the amount is grossed up so that the net receipt equals the contracted figure. The effect is that the cost to the payer is higher than the headline rate suggests.

This is a contracting point as much as a tax point. A withholding clause that says “all payments shall be made free and clear of any deduction” transfers the entire Indian tax cost to the payer, often without either party having priced it. Where a treaty rate is available but the documents are not produced, the payer bears the difference. Contracts are better drafted to make the treaty documents a condition of the beneficial rate, with the recipient bearing the consequence of not producing them.

The drafting point belongs as much to corporate law compliance as to tax, because it is settled in the contract rather than in the return.

What goes wrong

Disallowance of the expenditure. Failure to deduct, or to pay over what was deducted, on a payment to a non-resident results in the expenditure being disallowed in computing business income. For a substantial payment this is often a larger number than the tax itself.

Assessee-in-default proceedings. The payer becomes liable for the tax not deducted, along with interest running from the date deduction was due.

Characterisation disputes. The recurring battlegrounds are software payments, group cost allocations described as reimbursements, and payments for services said not to make technology available. These turn on the contract, the invoices and what was actually supplied.

Reimbursements assumed to be outside the section. A payment described as a reimbursement is not automatically outside section 195. The question is whether it carries an income element, and that depends on the underlying arrangement and on evidence of the actual cost incurred.

Year-end accruals. Provisions created at year end for services received from a group entity attract the section on credit, even though the invoice and the remittance follow months later.

Each of these is a routine part of business taxation services work, and each is avoidable with a file built at the time of the payment rather than afterwards.

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For four years, businesses buying and selling goods in India ran two nearly identical compliance obligations side by side. One sat on the buyer, one on the seller, both at 0.1 per cent, both with a fifty lakh rupee threshold, and both triggered by a ten crore rupee turnover test. Deciding which applied to a given transaction consumed a great deal of accounting time and produced a great many mismatches.

That position has changed. TCS on the sale of goods under section 206C(1H) was omitted with effect from 1 April 2025. The overlap no longer arises prospectively.

But the provision has not disappeared from a business’s file. It governed four financial years that remain open to assessment, reassessment and processing, and mismatches from those years continue to surface. This article sets out where the position now stands, and what still needs attention for the years in which both provisions were live.

The overlap that existed until 2025

Section 206C(1H) was introduced with effect from 1 October 2020. It required a seller whose total sales, turnover or gross receipts in the immediately preceding financial year exceeded ten crore rupees to collect tax at 0.1 per cent on consideration received from a buyer, to the extent that consideration exceeded fifty lakh rupees in the financial year.

Section 194Q followed with effect from 1 July 2021. It required a buyer whose total sales, turnover or gross receipts in the immediately preceding financial year exceeded ten crore rupees to deduct tax at 0.1 per cent on the purchase of goods from a resident seller, on the value exceeding fifty lakh rupees in the financial year.

The two provisions could apply to the same transaction. Where both a large buyer and a large seller were involved in a sale above the threshold, the buyer’s deduction obligation and the seller’s collection obligation were both triggered.

The statute resolved this by giving the buyer’s obligation precedence: where tax was deductible under section 194Q and had been deducted, the seller was not required to collect under section 206C(1H). In practice this meant that the seller had to know whether the buyer had deducted, which is information a seller does not naturally possess. Declarations were exchanged, systems were configured to suppress one or the other, and reconciliation between purchase ledgers and Form 26AS became a routine year-end exercise.

There was also a timing difference that caused persistent confusion. Section 194Q operated on payment or credit, whichever was earlier. Section 206C(1H) operated on receipt of consideration. The same sale therefore attracted the two provisions at different moments, and in a year straddling those moments the amounts did not line up.

What was withdrawn and from when

The Finance Act, 2025 omitted section 206C(1H) with effect from 1 April 2025. The stated rationale was that the provision had become largely redundant once section 194Q covered the same transactions from the buyer’s side, and that maintaining both imposed a compliance and reconciliation cost without a corresponding revenue benefit.

Two points on scope are worth being precise about, because they are frequently confused:

Only sub-section (1H) went. Section 206C itself remains on the statute book. Collection of tax at source continues for the other categories the section covers — scrap, timber and forest produce, alcoholic liquor, tendu leaves, minerals, motor vehicles above the specified value, and remittances under the Liberalised Remittance Scheme and overseas tour packages. A business that reads “TCS on sale of goods withdrawn” as “TCS abolished” will under-collect.

Section 194Q was not withdrawn. The buyer’s deduction obligation on the purchase of goods continues unchanged. If anything it becomes more prominent, because it is now the only provision operating on ordinary sales of goods.

Neither change affects the wider income tax obligations attaching to the same transactions.

Where the position stands now

For a sale of goods between residents in the current year, the analysis is simpler than it has been since 2020:

• The seller has no collection obligation under section 206C(1H), because the provision no longer exists.
• The buyer deducts under section 194Q if the buyer’s turnover in the immediately preceding financial year exceeded ten crore rupees and purchases from that seller exceed fifty lakh rupees in the financial year.
• The precedence rule that once governed the interaction has no work left to do on ordinary goods.

Systems configured before April 2025 to test for the overlap should have had the 206C(1H) branch disabled. Where that configuration was left in place, the result is over-collection from customers — an amount collected without statutory authority, which then has to be refunded or adjusted, and which will not match the customer’s Form 26AS.

For most businesses this simplifies business taxation compliance on ordinary sales considerably.

Why 206C(1H) still matters for open years

The provision governed transactions from 1 October 2020 to 31 March 2025. Those years remain live for several purposes, and a repealed provision is fully enforceable for the period during which it applied.

Processing intimations. Statements of tax collected at source continue to be processed, and intimations raising short-collection or late-payment demands for those quarters continue to be issued. A demand for financial year 2023-24 is not answered by pointing out that the section was later omitted.

Assessee-in-default proceedings. A seller who failed to collect where collection was required remains exposed for those years, subject to the relief available where the buyer has itself paid the tax and furnished the prescribed certification.

Interest. Interest for failure to collect or to pay over what was collected runs on the old obligation and is not affected by the omission.

Credit mismatches. Buyers claiming credit for tax collected in those years depend on the seller having correctly reported the collection against the buyer’s PAN. Where a seller suppressed 206C(1H) on the assumption that the buyer had deducted under 194Q, but the buyer had not, neither obligation was discharged and both parties have an exposure.

Tax audit reporting. Audit reports for those years carry clause-level reporting on TDS and TCS compliance. Errors identified now feed back into that reporting.

For the same reason, a business closing its books or responding to a notice for those years should read the provision as it stood in the relevant year, not as the position stands today. Our note on discrepancies found in tax audits deals with the wider point.

Where a demand has already been raised for one of those years, it is contested as ordinary tax litigation rather than answered by the current position.

The 194Q conditions that still catch businesses out

With 194Q now standing alone, the conditions that generate disputes deserve restating.

The turnover test looks backwards. It is the buyer’s total sales, turnover or gross receipts from business in the financial year immediately preceding the year of purchase. A business that crosses ten crore rupees in the current year does not become liable in that year.

The threshold is per seller, per financial year. Fifty lakh rupees is tested seller by seller and is cumulative across the year, not per invoice and not per order. Deduction applies to the value exceeding fifty lakh rupees, not to the whole amount.

The trigger is payment or credit, whichever is earlier. Credit to the seller’s account — including credit to a suspense or any other account — triggers the obligation even if payment follows much later.

Goods only. Section 194Q applies to the purchase of goods. Services attract the provisions applicable to them. Composite arrangements need to be examined rather than assumed.

Resident sellers only. A purchase from a non-resident seller falls outside section 194Q and is examined under the provisions governing payments to non-residents.

No PAN means a higher rate. Where the seller has not furnished a PAN, the elevated rate under the section dealing with failure to furnish PAN applies. Vendor master hygiene therefore has a direct rate consequence.

Purchase returns and credit notes. Where tax has already been deducted on a purchase that is subsequently returned or the price renegotiated, the adjustment has to be traced through both the deduction record and the seller’s credit. Leaving it untraced is the most common source of a year-end mismatch.

Reconciliation points for older years

Where financial years 2020-21 to 2024-25 are being closed out, checked for a notice, or reviewed before an assessment, four reconciliations are worth running:

1. Purchase ledger against tax deducted under 194Q — seller by seller, against the fifty lakh threshold, for each year in which the buyer met the turnover test.
2. Sales ledger against tax collected under 206C(1H) — buyer by buyer, on a receipts basis, for each year the provision was in force and the seller met the turnover test.
3. Both against Form 26AS — confirming that what was deducted or collected was reported against the correct PAN and appears in the counterparty’s statement.
4. Declarations on file — the buyer declarations relied on to suppress collection. Where a seller suppressed collection on the strength of a declaration, the declaration is the defence, and it needs to exist.

Findings from these reconciliations feed directly into the tax audit process for the years concerned.

What changes again from 1 April 2026

From 1 April 2026 the Income-tax Act, 2025 governs sums paid or credited on or after that date. The withholding obligations that were spread across the 194 series have been consolidated, with section 393 read together with the relevant schedule carrying the deduction provisions.

The substance of the buyer’s obligation on the purchase of goods is carried forward, but the reference by which it is cited changes. Deduction masters, vendor communications and challan narrations that quote “194Q” by number will need to be revisited, and any reply or certificate relating to a payment made on or after 1 April 2026 should cite the new provision. Sums paid or credited on or before 31 March 2026 continue to be governed by the 1961 Act and are correctly cited as 194Q.

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