GSTAT Ruling: Evidentiary Burden in GST Demands and the Insufficiency of CA Certificates for Exemption Claims

The Goods and Services Tax Appellate Tribunal (GSTAT) recently delivered a crucial decision regarding the evidentiary requirements for claiming tax exemptions on interest income. In the matter of Jana Small Finance Bank Limited Vs Pushpendra Kumar Meena (GSTAT), bearing Appeal Number APL/30/RPR/2026, the Tribunal evaluated the validity of tax demands arising from unreconciled turnover reported in Form GSTR-9C. The order, dated 22/09/2026, underscores a fundamental principle in indirect taxation: statutory exemptions cannot be claimed merely on the basis of consolidated audit reports or generic professional certificates without the backing of specific, transaction-level documentary evidence.

This comprehensive analysis delves into the factual matrix, the legal contentions raised by the assessee and the revenue department, the statutory interpretation of exemption notifications, and the broader implications of this ruling for banking and financial institutions operating across multiple states.

Factual Matrix of the Dispute

The genesis of the dispute traces back to a scrutiny of the assessee's GST returns conducted by the proper officer under Section 61 of the Central Goods and Services Tax Act, 2017 (CGST Act), read with Rule 142(1A) of the CGST Rules, 2017. During this assessment, the proper officer identified significant discrepancies, specifically an unreconciled taxable turnover disclosed in Table 7G of the annual reconciliation statement (Form GSTR-9C).

To address these discrepancies, the department initiated standard procedural mechanisms:

  • A notice in Form GST ASMT-10 was issued on 30.03.2022.
  • Subsequent reminders were dispatched on 12.06.2022, 24.06.2022, and 20.09.2022.
  • Following the assessee's failure to respond within the stipulated timeframe, an intimation in Form DRC-01A was issued.
  • Ultimately, a detailed show cause notice (SCN) in Form DRC-01 was issued on 27.09.2023.

The assessing officer concluded the proceedings by determining an assessed turnover of Rs. 3,51,68,888/-. Consequently, a tax liability at the rate of 18% was levied, alongside applicable interest and penalties under Section 50(1) of the CGST Act. The resultant Demand Order in Form DRC-07 specified a CGST demand of Rs. 31,65,020/-, SGST of Rs. 31,65,020/-, coupled with identical interest amounts of Rs. 31,31,029/- for both CGST and SGST, and a penalty of Rs. 3,16,502/- under each head.

The assessee challenged this assessment order by filing a first appeal. However, the Appellate Authority and Joint Commissioner (Appeal), State Tax, Raipur, dismissed First Appeal No. 1020/GST/2024 via an order dated 21.03.2025, prompting the assessee to escalate the matter to the GSTAT.

Core Contentions of the Assessee

During the appellate proceedings before the Tribunal, the assessee strategically confined its arguments to a specific portion of the demand—the claimed interest amount of Rs. 3,51,62,835/-. The primary defense rested on both substantive tax law and procedural jurisprudence.

Substantive Arguments on Exemption

The assessee asserted that the disputed amount of Rs. 3,51,62,835/- represented exempt interest income. According to the submissions, this figure comprised various internal banking adjustments, including:

  • Clawback interest reversal on Non-Performing Assets (NPAs).
  • EIS interest reversal pertaining to securitisation transactions.
  • Interest reversals for value-dated transactions.
  • Provisions for accrued interest on NACH cheque bounce cases.