Critical Tax & Regulatory Updates Every Indian Business Must Know – Week Ending 1st March 2026

The regulatory machine never stops. This week — ending 1st March 2026 — delivered a Supreme Court ruling on GST classification, a compliance amnesty scheme from MCA that every defaulting company cannot afford to ignore, a redrawn India–France tax treaty, and a brutal 50% cut in RoDTEP rates for exporters. If your business ran on last week’s knowledge, you are already behind.

GST Updates March 2026: Supreme Court Rulings, High Court Orders & AAR Decisions That Matter

GST remains India’s most dynamic and litigation-prone tax law. This week delivered a clutch of critical rulings — from the Supreme Court redefining product classification to AARs clarifying registration, exemptions, and ITC eligibility across sectors.

Rooh Afza Classified as ‘Fruit Drink’: Supreme Court Settles GST Classification Dispute

The Supreme Court of India has ruled that Hamdard’s Rooh Afza qualifies as a “fruit drink” under Entry 103 of Schedule II (Part A), attracting VAT at the concessional rate of 4% — not 12.5% under the residuary entry.

The Court made a vital legal point: regulatory or licensing classifications under food safety laws cannot override how a product is interpreted under fiscal entry statutes. Where a product reasonably fits a specific entry, resort to the residuary entry is impermissible.

What this means for your business: If you manufacture, distribute, or retail beverages and have been paying tax on residuary classifications — this ruling is a red flag to review your product classification strategy immediately.

📌 Hamdard (Wakf) Laboratories vs Commissioner | SC | Civil Appeal No. 2557-2578 of 2026 | 25/02/2026

RAJASTHAN HIGH COURT | 23/02/2026

University Affiliation Fees Are Not a Supply of Service Under GST — Rajasthan HC

In a significant ruling for the education sector, the Rajasthan High Court held that a university granting affiliation to colleges is discharging a statutory mandate — not conducting a commercial or business activity. Therefore, affiliation fees do not constitute a “supply of service” under Section 7 of the CGST Act and are not liable to GST.

📌 Rajasthan Technical University vs Union of India | D.B. Civil Writ Petition No. 9556/2024 | 23/02/2026

AAR WEST BENGAL | 27/02/2026

Hookah at Restaurants: NOT a Restaurant Service — GST at 40% (Tobacco) & 18% (Non-Tobacco)

Restaurant owners who have been charging GST at 5% on hookah — assuming it qualifies as restaurant supply — must stop immediately. The AAR West Bengal has ruled that hookah is a supply of goods, not a restaurant service:

• Tobacco-based hookah → 40% GST (HSN 2403, Schedule III)
• Non-tobacco hookah (dry tea, mint, petals) → 18% GST (Schedule II, Sr. 639)
• Food served at same venue → 5% GST continues to apply normally

📌 Indian Wire Products Company | AAR WB | Ruling No. 33/WBAAR/2025-26 | 27/02/2026

⚠️  ALERT: Non-Alcoholic Beverages at 40% GST AAR West Bengal has ruled that non-alcoholic beverages under Tariff Item 22029990 fall under Schedule III and attract 20% CGST + 20% SGST = 40% total GST. However, iced tea preparations (heading 210120) and syrups/concentrates (heading 21069019) continue to attract 5% GST. Source: Saga Organics Pvt Ltd | AAR WB | 27/02/2026

AAR GUJARAT | 24/02/2026

IIMs Are Liable to Deduct GST TDS — Confirmed as ‘Specified Person’

Indian Institutes of Management (IIMs) — being statutory bodies established by Parliament with significant government control — are held to be “specified persons” required to deduct GST TDS under Section 51 of the CGST Act on payments to suppliers where contracts exceed prescribed thresholds.

📌 Indian Institute of Management | AAR Gujarat | Advance Ruling No. GUJ/GAAR/R/2026/06 | 24/02/2026

AAR WEST BENGAL | 27/02/2026

GST Exemption Denied to FCI — Government Entity ≠ Government Under Notification 12/2017

The Food Corporation of India (FCI) was denied GST exemption under Serial No. 3 of Notification 12/2017. Exemption requires three cumulative conditions: (1) pure service; (2) provided to Central/State Government, Union Territory, or local authority; (3) relating to functions under Articles 243G or 243W. FCI is a Government Entity — but not Central/State Government, UT, or local authority. It fails condition two.

📌 Food Corporation of India | AAR WB | Advance Ruling No. 35/WBAAR/2025-26 | 27/02/2026

AAR MAHARASHTRA | 30/12/2025

Education Consultancy to Foreign Universities = Export of Services — ITC Refund Eligible

Indian education consultants facilitating admissions for foreign universities and receiving commission from abroad can treat such receipts as export of services — eligible for refund of accumulated Input Tax Credit. Fees from Indian students in India attract GST. Free services under promotional schemes are not a supply and do not attract GST.

📌 Eduguide Overseas Studies Pvt Ltd | AAR Maharashtra | Order No. GST-ARA-29/2020-21/642 | 30/12/2025

AAR RAJASTHAN | 17/12/2025

No Separate GST Registration Needed in Another State Without a Fixed Establishment

A Lucknow-based company executing a solar PV project in Bikaner, Rajasthan does not require separate GST registration in Rajasthan, provided it has no “fixed establishment” or “place of business” there. Supply can be treated as inter-state from UP, attracting IGST. Useful precedent for companies executing project-based contracts across states.

📌 Safety Controls & Devices Ltd | AAR Rajasthan | Advance Ruling No. RAJ/AAR/2025-26/18 | 17/12/2025

MCA Companies Compliance Facilitation Scheme 2026 (CCFS-2026): Your Window to Fix Pending ROC Filings

🚨  CCFS-2026 is open from 15th April 2026 to 15th July 2026. If your company has missed filing annual returns or financial statements with the ROC, this is your best — and possibly last — low-cost opportunity to regularise before enforcement escalates.

MCA GENERAL CIRCULAR 01/2026 | DATED 24/02/2026

CCFS-2026: 90% Relief on Additional ROC Filing Fees — Three Exit Options for Defaulting Companies

Under Section 403 of the Companies Act, 2013, late filings attract ₹100 per day with no upper limit. CCFS-2026 offers three structured options:

• Option 1 — Regularise Annual Filings: Pay only 10% of the additional fees otherwise payable and complete all pending annual filings (AOC-4 and MGT-7). Immunity from penalties under Sections 92 and 137 is available.
• Option 2 — Dormant Status: Opt for dormant status under Section 455 by paying 50% of the normal filing fee.
• Option 3 — Strike-Off: Apply for voluntary strike-off via e-form STK-2 by paying 25% of the applicable filing fee.

Who is excluded? Companies already under compulsory strike-off action, dissolved entities, vanishing companies, or those that have already applied for dormancy under Section 455.

📌 MCA General Circular 01/2026 | Dated: 24/02/2026

📌  Practical Example — CCFS-2026 Scenario: ABC Pvt Ltd has not filed MGT-7 and AOC-4 for three consecutive years (FY 2021-22, 2022-23, 2023-24). Under normal provisions, additional fees could run into several lakhs. Under CCFS-2026: The company can file all three years by paying only 10% of the total additional fee during the amnesty window (15 April – 15 July 2026), receiving complete immunity from Section 92 and 137 penalties. The savings could be 90% of the total penalty burden.

Income Tax Updates March 2026: India–France DTAA Amended, Foreign Tax Credit Relief & Key Court Rulings

PRESS RELEASE | 23/02/2026

India–France DTAA Amended: Major Changes in Capital Gains, Dividends & Permanent Establishment

• Capital Gains: Full taxing rights on gains from sale of shares granted to the country of residence of the company whose shares are being sold — key shift for cross-border M&A.
• MFN Clause Deleted: The Most-Favoured-Nation clause has been permanently removed, ending long-standing ambiguity around reduced rates available under other DTAAs.
• Dividend Withholding Tax: 5% for shareholders holding ≥10% capital; 15% for all others.
• Fees for Technical Services: Redefined in alignment with the India–US DTAA, narrowing its scope.
• Service Permanent Establishment (PE): Added explicitly — significant for Indian companies providing services to French entities and vice versa.

📌 Income Tax Press Release | Dated: 23/02/2026

DELHI HIGH COURT | 13/02/2026

Foreign Tax Credit (FTC) Cannot Be Denied Merely for Late Filing of Form 67 — Delhi HC

The Delhi High Court has held that foreign tax credit cannot be denied solely because Form 67 was filed after the due date. The PCIT has power under Section 264 to condone such delay, and a procedural lapse cannot deprive a taxpayer of a substantive treaty right.

📌  Practical Example — FTC / Form 67 Scenario: An IT professional had tax deducted at source in the US on software licence income. He filed his Indian return on time but submitted Form 67 (FTC claim form) 45 days late. The Assessing Officer denied the FTC claim. Post this ruling: Such denial is not sustainable. The taxpayer can approach PCIT under Section 264 to have the delay condoned and the credit restored.

📌 Real Time Data Services Pvt Ltd vs PCIT | Delhi HC | W.P.(C) 959/2024 | 13/02/2026

DELHI HIGH COURT | 12/02/2026

Excise Duty Refund Under Investment Incentive Scheme = Capital Receipt, Not Taxable Income

Delhi High Court held that an excise duty refund of ₹59.68 crore received under a government incentive scheme linked to capital investment in the Kutch district is a capital receipt and not taxable as income. The Revenue’s attempt to reduce this subsidy from the block of assets for depreciation was also rejected.

📌 PCIT vs Jindal Saw Ltd | Delhi HC | ITA 689/2025 | 12/02/2026

DELHI HIGH COURT | 22/01/2026

Charitable Trusts Cannot Lose Tax Exemption Due to Technical Errors in ITR

A registered charitable trust inadvertently declared interest income under “income from other sources” instead of claiming it as exempt — resulting in an unwarranted tax demand. Delhi HC held firmly: registered charitable trusts cannot be denied tax exemptions solely due to clerical or technical errors such as misclassifying income under the wrong head.

📌 International Buddhist Confederation vs ITO | Delhi HC | ITA 18/2026 | 22/01/2026

CBDT NOTIFICATION 18/2026 | 27/02/2026

Section 35(1)(ii): Sri Ramachandra Institute Chennai Approved for Scientific Research Deduction

CBDT has notified Sri Ramachandra Institute of Higher Education and Research Trust, Chennai, as an approved institution. Donors can now claim a deduction equal to 1.5 times the amount contributed toward scientific research at this institution.

📌 Income Tax Notification No. 18/2026 | Dated: 27/02/2026

DGFT & Customs Updates: Wheat Export Quotas, RoDTEP Rate Cuts & Revised Tariff Values

DGFT NOTIFICATION 60/2026 | 23/02/2026 — CRITICAL FOR EXPORTERS

RoDTEP Rates Slashed by 50% — A Major Setback for Exporters of Manufactured Goods

DGFT has issued a rationalisation notification reducing RoDTEP rates for all HS lines in Appendix 4R and 4RE to 50% of previously notified rates. Value caps are also halved. The cut does NOT apply to products under ITC HS Chapters 01 to 24 (agri and food products). For textiles, engineering, chemicals, and electronics exporters — immediately re-examine export costing and pricing strategies.

📌  Example — RoDTEP Cut Impact XYZ Textiles was claiming RoDTEP at 1.5% on ₹10 crore monthly exports = ₹15 lakh/month. Post-notification: rate drops to 0.75% = ₹7.5 lakh/month. That is a ₹90 lakh annual reduction in export incentives. Update your pricing models before new orders.

📌 DGFT Notification 60/2026 (with Corrigendum) | Dated: 23/02/2026

DGFT NOTIFICATION 62/2026 | 24/02/2026

Wheat Export: 25 LMT Quota Opened — CA-Certified Turnover Statement Required

Export of 25 Lakh Metric Tonnes of wheat is now permitted despite the overall prohibited status. Applications must include a Chartered Accountant-certified export turnover statement for the preceding five financial years. Authorisations are valid for six months, non-transferable, and allocated by a Special Exim Facilitation Committee (EFC). Applications to be filed during the first ten days of each month.

📌 DGFT Notification 62/2026 | DGFT Public Notice 49/2026 | Dated: 24/02/2026

DGFT NOTIFICATION 61/2026 | 24/02/2026

Wheat Flour Export: Additional 5 LMT Permitted with CA Certificate Requirement

An additional 5 LMT of wheat flour and related products (HS Code 1101) is now permitted, over and above the 5 LMT already allowed under Notification 55/26. Applications require a CA certificate of export turnover for five preceding financial years, and a self-declaration confirming use of domestic wheat only.

📌 DGFT Notification 61/2026 | Dated: 24/02/2026

CUSTOMS NOTIFICATIONS 23 & 24/2026 (NT)

Revised Tariff Values for Gold, Silver & Edible Oils — Effective 25th & 28th February 2026

• Gold: USD 1,664 per 10 grams (w.e.f. 28/02/2026)
• Silver: USD 2,800 per kg (w.e.f. 28/02/2026)
• Crude Palm Oil: USD 1,103 per MT
• Areca Nut: USD 7,020 per MT

📌 Customs Notification 23/2026 (NT) | 24/02/2026 — Customs Notification 24/2026 (NT) | 27/02/2026

SEBI, IBBI & RBI Regulatory Changes: Mutual Funds, Insolvency Valuation & NBFC Directions

SEBI CIRCULAR | 26/02/2026

SEBI Overhauls Mutual Fund Scheme Categorisation: Portfolio Overlap Limits, No Return-Focused Names

• Portfolio overlap limits introduced for sectoral/thematic equity schemes — quarterly computation and phased realignment required
• Scheme names must be ‘true-to-label’ — return-focused words in names are now prohibited
• Solution-Oriented Schemes discontinued — will stop new subscriptions and merge post-SEBI approval
• Medium duration debt funds may reduce portfolio duration under adverse conditions with documented justification

📌 SEBI Circular | Dated: 26/02/2026

SEBI CIRCULAR | 26/02/2026 — GOLD & SILVER ETF VALUATION

Gold & Silver ETF Valuation to Shift to Stock Exchange Spot Prices from 1 April 2026

From 1 April 2026, Gold and Silver ETFs will use polled spot prices from recognised stock exchanges — replacing the LBMA AM fixing-based mechanism. This reflects domestic market conditions and ensures uniformity across fund houses.

📌 SEBI Circular | Dated: 26/02/2026

IBBI NOTIFICATIONS | 25/02/2026

IBBI Strengthens Insolvency Valuation: Two Sets of Valuers, Revised Fair Value & Expanded Disclosures

• Fair value redefined to include tangible and intangible assets along with underlying synergies
• Two sets of registered valuers must now be appointed with a Coordinating Valuer in each set
• Where estimates differ by 25% or more, a third set of valuers is required
• Disclosure norms expanded to include unclaimed allottees, receivables, JDA details, and assets under attachment

📌 IBBI Notifications | Dated: 25/02/2026

RBI CIRCULAR 224/2026 | 26/02/2026

RBI Permits NUCFDC to Issue Equity to Over 200 Investors to Support Urban Co-operative Banks

RBI has amended NBFC Miscellaneous Directions to enable NUCFDC — umbrella organisation for over 1,400 primary urban co-operative banks — to issue equity shares through private placement to more than 200 persons in a financial year, subject to conditions including a Board-approved resource plan and mandatory quarterly reporting.

📌 RBI Circular No. 224/2026 | Dated: 26/02/2026

How These Updates Affect Real Businesses: Worked Examples

Example 1 — Restaurant Owner (GST Hookah Ruling) Mr. Arjun runs a lounge-restaurant in Delhi serving food, non-alcoholic cocktails, and tobacco hookah. Until now, he charged 5% GST on all items including hookah, treating everything as ‘restaurant service.’ Post-ruling: Hookah (tobacco-based) must now be billed at 40% GST (HSN 2403). Failure to do so exposes Mr. Arjun to GST demand, interest, and a 100% penalty. He must restructure his billing software, retrain staff, and file revised returns.

Example 2 — Exporter (RoDTEP Rate Cut) XYZ Textiles was claiming RoDTEP benefits at 1.5% of FOB on ₹10 crore monthly shipments = ₹15 lakh/month in duty credit scrips. Post-notification: Rate is now 0.75%. Monthly credit drops to ₹7.5 lakh — a ₹90 lakh annual reduction. Exporters must immediately revisit pricing models and contract terms for FY 2026-27.

Example 3 — Company with Pending ROC Filings (CCFS-2026) DEF Solutions Pvt Ltd has not filed its Annual Return for FY 2022-23 and FY 2023-24. Cumulative additional fee under Section 403 stands at approximately ₹8 lakhs. Under CCFS-2026: The company can regularise both filings by paying only ₹80,000 (10% of ₹8 lakhs) — saving ₹7.2 lakhs — between 15 April and 15 July 2026.

Example 4 — Cross-Border Business (India–France DTAA) A French company holds 15% shares in an Indian subsidiary and was previously relying on the MFN clause in the India–France DTAA to claim reduced dividend withholding rates. Post-amendment: The MFN clause is permanently deleted. The route to rate reduction via MFN is closed forever. Companies relying on MFN arguments in any DTAA context must urgently revisit their tax planning.

Frequently Asked Questions on This Week’s Regulatory Updates

Q1. What is the last date to avail the Companies Compliance Facilitation Scheme 2026 (CCFS-2026)?

The CCFS-2026 scheme is open from 15th April 2026 to 15th July 2026. Companies must complete their pending annual filings (AOC-4 and MGT-7) and pay only 10% of the additional fee within this window to avail the benefit and immunity from penalties under Sections 92 and 137 of the Companies Act, 2013.

Q2. Can a company opt for strike-off under CCFS-2026 even if it has pending annual returns?

Yes. Under CCFS-2026, defaulting companies can apply for voluntary strike-off via e-form STK-2 by paying 25% of the applicable filing fee. Companies already under compulsory strike-off, dissolved, or classified as vanishing companies are not eligible.

Q3. My company filed Form 67 late and foreign tax credit was denied — what should I do?

Based on the Delhi High Court ruling in Real Time Data Services Pvt Ltd vs PCIT (13/02/2026), you can file a revision application before the Principal Commissioner of Income Tax (PCIT) under Section 264, requesting condonation of the delay and restoration of your FTC claim.

Q4. Does the 50% RoDTEP rate cut apply to all export products?

No. The 50% reduction applies to all HS lines in Appendix 4R and 4RE EXCEPT products under ITC HS Chapters 01 to 24 (agricultural and food products). Exporters of manufactured goods — textiles, engineering goods, chemicals, electronics — are most significantly impacted.

Q5. Is GST applicable on hookah served at a restaurant?

Yes, and at rates far higher than most restaurant owners assumed. Tobacco-based hookah: 40% GST (HSN 2403). Non-tobacco hookah: 18% GST. The 5% restaurant service rate does NOT apply to hookah. Food served at the same establishment continues to attract 5% GST separately.

Q6. What has changed in the India–France DTAA?

Four key changes: (1) Source country now has full taxing rights on capital gains from share sales; (2) MFN clause permanently deleted; (3) Dividend withholding tax is 5% (≥10% capital holders) and 15% (others); (4) Service Permanent Establishment clause added. Businesses with Indo-French arrangements must urgently review their treaty positions.

Q7. Can I export wheat flour now despite the prohibition?

Yes, on a limited quota basis. The government has opened an additional 5 LMT quota for wheat flour exports under Notification 61/2026. Applications must include a CA-certified export turnover statement for the last five financial years. Authorisations are non-transferable with a six-month validity.

Disclaimer

This blog post is prepared solely for educational and informational purposes. It is a summary and analysis of regulatory developments and does not constitute legal, tax, or financial advice. All citations refer to publicly available notifications, circulars, and judicial decisions. Readers are advised to consult a qualified Chartered Accountant for advice specific to their circumstances. This content complies with ICAI guidelines on professional conduct and does not constitute solicitation of any kind. © 2026 CA Kunal Kapoor | www.kunalkapoorca.com | All rights reserved.