1. Mandatory Sequential Filing of GSTR-7: A Procedural Reinforcement for TDS Deductors
Background:
Section 51 of the CGST Act, 2017 mandates TDS deduction under GST by notified persons (primarily Government departments and public sector undertakings) at the rate of 2% (1% CGST + 1% SGST) on notified supplies exceeding ₹2.5 lakh under a contract.
The return in Form GSTR-7 must be filed by such deductors under Rule 66 of the CGST Rules to report tax deducted and pass the credit to suppliers.
Regulatory Amendment (Effective April 1, 2025):
CBIC has enforced a system-based control to mandate sequential filing of GSTR-7. This means:
- Return for a current tax period cannot be filed unless the GSTR-7 for all prior periods is filed.
- Even Nil GSTR-7 filings are required in sequence.
- This logic is similar to the existing restriction in GSTR-1 and GSTR-3B filing, introduced earlier to curb gaps in reporting and evasion.
Technical Justification:
- This control is embedded in the GSTN back-end architecture, using validations under Rule 66(2) read with Section 39(3) of the CGST Act.
- It enables real-time reconciliation of TDS deducted and TDS claimed by the deductee in GSTR-2A and GSTR-2B.
Practical Implication for Deductors:
| Area | Before Amendment | Post April 2025 |
|---|---|---|
| GSTR-7 Filing | Non-sequential allowed | Mandatory sequential |
| Skip Filing | Permissible with late fees | Not permitted |
| TDS Credit Pass | May delay for suppliers | Streamlined and time-bound |
| System Validation | Minimal | Strict at portal level |
Penalties & Late Fees Reminder (Section 122):
- ₹100 per day (CGST) + ₹100 (SGST), max ₹5,000 each, for delay in GSTR-7 filing.
- Interest under Section 50 if TDS is not deposited on time.
Action Points for Businesses:
- Identify and clear any pending GSTR-7 filings.
- Ensure Nil returns are filed for inactive periods.
- Update internal SOPs to reflect the new sequential requirement.
- Automate your compliance calendar to avoid portal lock-in.
2. Amendments to Refund and Appeal Rules: CGST Rules Notification No. 11/2025
Context:
Refund provisions are governed by Section 54 of the CGST Act and procedural requirements are detailed in Rules 89 to 97A of the CGST Rules, 2017. Appeals fall under Sections 107 to 121, and procedural aspects are governed by Rules 108 to 116.
On March 27, 2025, CBIC notified Notification No. 11/2025 – Central Tax, introducing targeted amendments to prevent misuse of refund mechanisms and streamline appeal withdrawals.
Technical Amendments:
A. Refund Ineligibility – Rule 92 Modified
“No refund shall be granted for the component of tax, interest, penalty, or any amount paid prior to the notification, when part of a consolidated notice/order covering multiple periods.”
Interpretation:
- If a taxpayer has already discharged liability for part of the period covered in a Show Cause Notice (SCN) or order, no refund can be claimed against that portion post-notification.
- This addresses instances where taxpayers attempted to claim erroneous or double refunds when adjudication orders were reversed in part.
B. Partial Appeal Withdrawal – New Proviso under Rule 108 / 109
“Appeals pertaining to tax periods from July 1, 2017, to March 31, 2020, may be withdrawn in part, without affecting appeals for subsequent periods.”
Interpretation:
- Enables selective settlement of disputes through formal withdrawal without impacting appellate rights for future periods.
- Particularly useful during settlement schemes or partial reversals by appellate authorities.
Impact Assessment:
| Change | Affected Rule | Impacted Stakeholder |
|---|---|---|
| Refund restriction for part-paid demand | Rule 92 | Exporters, Inverted Duty claimants |
| Partial withdrawal of appeals | Rule 108/109 | Taxpayers litigating in GSTAT/HC |
Recommended Actions for Taxpayers:
- Reassess refund applications where adjudication spans multiple tax periods.
- Consult legal or GST advisors before filing or withdrawing appeals.
- Utilize partial appeal withdrawal strategically to reduce litigation and interest exposure.
- Maintain updated documentation of payments made pre- and post-notification.
Conclusion
Both updates — sequential GSTR-7 filing and procedural amendments to refund and appeal rules — reflect the government’s emphasis on procedural rigor and audit trail integrity in the GST regime.
While they add short-term compliance responsibilities, these changes are likely to enhance transparency, reduce fraudulent claims, and improve reconciliation between returns, assessments, and books of account.
Stox N Tax 
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