GST Updates

PORTAL ENFORCEMENT  |  GSTN  |  EFFECTIVE 1 APRIL 2026

GSTR-3B Hard Block Now Live: Zero Mismatch Policy and IMS Deemed Acceptance Begin Their First Full Filing Cycle

From 1 April 2026, the GST portal moved from warning-mode to enforcement-mode on Input Tax Credit reconciliation. Where the ITC claimed in GSTR-3B exceeds what auto-populates into GSTR-2B from supplier filings, the portal now blocks the return from being submitted at all. There is no manual override and no grace period. The block is released only when the recipient either reduces the ITC claim or the supplier files the missing GSTR-1 / IFF. The corresponding restriction also operates where the closing balance in the Electronic Credit Reversal and Re-claimed Statement (ECRS) is negative, or where Reverse Charge Mechanism (RCM) liabilities reflected in the RCM Liability/ITC Statement remain unpaid. The first month-end test of the new regime arrives on 20 May 2026 with GSTR-3B for April.

The Invoice Management System (IMS) is now the front-end for this enforcement. Every B2B invoice, debit note, credit note, and Bill of Entry uploaded by a counterparty arrives in the recipient's IMS dashboard. The recipient must take one of three actions on each record: Accept, Reject, or Pending. Per the official GSTN advisory, no action by the GSTR-3B due date constitutes deemed acceptance, and the record automatically flows into GSTR-2B as eligible ITC. This creates a two-sided risk. Where a supplier wrongly tags an invoice to a GSTIN, the invoice auto-accepts unless rejected, and the recipient becomes liable to reverse the ITC with 18% interest under Section 50 if a mismatch is detected later. Where a supplier issues a credit note, the recipient must now actively reverse the attributable ITC through IMS as required under the amended Section 34. Weekly IMS review is the operational baseline. Monthly reconciliation no longer suffices.

RATE STRUCTURE  |  CBIC  |  EFFECTIVE 1 APRIL 2026

GST 2.0 Rate Slabs and ₹5 Crore e-Invoicing Threshold Now Operational: Master Files Need Immediate Verification

The GST rate rationalisation that flows from Budget 2026 became operational on 1 April. The headline change is the consolidation of slabs into 0%, 5%, 18% and 40%, with the long-standing 12% and 28% rates phased out for most categories. Businesses still applying 12% on any invoice issued on or after 1 April are non-compliant and exposed to penalty proceedings under Section 122 of the CGST Act. Product masters in ERP and billing systems should be re-mapped against the revised HSN-rate notification before the next outward invoice is raised. Where a re-rated product has been billed at the wrong rate during April, a credit note correction issued and reflected in IMS is the cleanest remediation path before the GSTR-1 filing on 11 May.

In parallel, e-invoicing is now mandatory for every GSTIN with Aggregate Annual Turnover above ₹5 crore in FY 2025-26. The earlier ₹10 crore threshold has been retired. Invoices, debit notes, and credit notes issued without an Invoice Reference Number (IRN) generated through the IRP are not valid for ITC in the buyer's hands and attract a penalty of ₹10,000 per invoice or 100% of the tax involved, whichever is higher. For taxpayers with AATO of ₹10 crore and above, the existing 30-day window for reporting an invoice on the IRP applies. The Letter of Undertaking (LUT) for FY 2026-27 needs to be in place before any zero-rated export invoice is generated. The LUT for FY 2025-26 expired on 31 March 2026 and does not carry forward. Any export invoice raised in April without a valid LUT is liable to IGST at 18%. The minimum threshold of ₹1,000 for export refund claims has been removed, so all valid refunds are now processable.

Sources: ClearTax — GST Changes from 1st April 2026  |  ValiDraft — GST Changes May 2026: Rates, IMS, ITC Hard Block

Income Tax Updates

ACT TRANSITION  |  CBDT  |  EFFECTIVE 1 APRIL 2026

TDS Section Numbering Reset Under Income Tax Act, 2025: Old 194-Series Codes No Longer Valid for FY 2026-27 Transactions

With the Income Tax Act, 2025 in force from 1 April 2026, the entire TDS framework has been reorganised under Sections 392, 393 and 394 of the new Act. Section 392 covers Tax Deducted at Source on payments other than salary, Section 393 covers TDS on salary, and Section 394 covers Tax Collected at Source. Legacy section codes such as 194C (contractors), 194J (professional fees), 194H (commission), and 194-IB (rent) are no longer valid identifiers for transactions taking place on or after 1 April 2026. Quoting an old section code on a challan or in a return for a post-1 April transaction will trigger system-level validation errors at the e-filing portal and at the integrated e-Pay challan module. The transition principle is timing-based: the law that applies is determined by when the payment or credit (whichever is earlier) is triggered. A March 2026 invoice paid in April is governed by the old Act because the credit was made earlier; an April 2026 fee paid in May is governed by the new Act.

The downstream forms have also been renumbered. Form 16, the annual TDS certificate for salaried employees, has been replaced by Form 130; Form 16A, the certificate for non-salary TDS, becomes Form 131. Forms 15G and 15H for self-declarations have been consolidated into Form 121, with Form 60 replaced by Forms 97 and 98 for non-PAN holders. The first TDS deposit deadline under the new Act fell on 30 April 2026, the due date for tax deducted in March 2026 by non-government deductors. A separate quarterly TDS return for Q4 of FY 2025-26 (Forms 24Q, 26Q, 27Q, 27EQ) is due on 31 May 2026, and that return is filed under the Income Tax Act, 1961, since the deductions to which it relates predate 1 April. Practitioners managing both regimes through May should pay particular attention to challan generation: under the integrated e-Pay module, the wrong Act selection generates allocation errors that have to be corrected manually after the fact.

Sources: Income Tax Department — TDS Compliance Transition FAQ  |  CAclubindia — New Tax Rules and TDS Section Changes (30 Apr 2026)

MCA Updates

NOTIFICATION  |  MCA  |  G.S.R. 169(E)  |  10 MARCH 2026

AS 22 Amended for OECD Pillar Two: Deferred Tax Exception Mandatory, Four New Disclosure Paragraphs Inserted

The Ministry of Corporate Affairs has notified the Companies (Accounting Standards) Amendment Rules, 2026 through G.S.R. 169(E) dated 10 March 2026, amending Accounting Standard 22 on Accounting for Taxes on Income to align with the OECD's Pillar Two Global Minimum Tax framework. A new Paragraph 2A has been inserted clarifying that AS 22 applies to taxes arising from any law enacted or substantively enacted to implement the Pillar Two Model Rules, including Qualified Domestic Minimum Top-up Taxes (QDMTT). However, the same paragraph introduces a critical departure from standard timing-difference accounting: enterprises shall neither recognise nor disclose deferred tax assets or liabilities related to Pillar Two income taxes. The exception is mandatory, not optional, and any deferred tax already booked on Pillar Two exposure must be reversed.

In place of deferred tax accounting, the amendment introduces four new disclosure paragraphs (32A to 32D). Paragraph 32A requires a statement that the deferred tax exception has been applied. Paragraph 32B requires the current tax expense or income arising from Pillar Two taxes to be disclosed separately on the face of the financial statements. Paragraph 32C applies where Pillar Two legislation has been enacted or substantively enacted but is not yet in effect, requiring qualitative and quantitative disclosure of the entity's potential exposure. Paragraph 32D covers the operative period once the law is in force. Small and Medium-sized Companies (SMCs) are exempt from Paragraphs 32C and 32D. The amendment is effective immediately, with disclosure requirements applying for reporting periods beginning on or after 1 April 2025. Large multinational enterprises with consolidated revenue at or above the Pillar Two threshold should engage their statutory auditors now on the disclosure approach for FY 2025-26 financial statements.

Sources: Taxmann — MCA Amends AS 22 to Align with OECD Pillar Two  |  Business Standard — MCA Aligns Accounting Standards with OECD Pillar Two (18 Mar 2026)

RBI & Financial Sector

MONETARY POLICY  |  RBI MPC  |  6 – 8 APRIL 2026

MPC Holds Repo Rate at 5.25%, Retains Neutral Stance: First Core Inflation Projection of 4.4% Introduced for FY27

The Reserve Bank of India's Monetary Policy Committee, at its April 2026 review concluded on 8 April, voted unanimously to hold the policy repo rate unchanged at 5.25% and to retain the neutral stance. Consequently, the Standing Deposit Facility (SDF) rate remains at 5.00% and the Marginal Standing Facility (MSF) and Bank Rate at 5.50%. The hold follows the cumulative 125 basis points of cuts delivered through 2025 and signals that, in the Committee's assessment, the policy stance currently provides flexibility to respond to incoming data without committing to further easing or tightening. Governor Sanjay Malhotra noted in the post-meeting commentary that real rates remain elevated and that the probability of rates remaining lower for longer is alive, but the Committee is unwilling to commit to a path while West Asia supply-chain risks remain unresolved.

On the projections, the MPC pegged CPI inflation for FY27 at 4.6%, against an average of 1.9% recorded over the first eleven months of FY26. Importantly, the Committee published a core inflation projection for the first time, expecting CPI excluding food and fuel to average 4.4% in FY27. This is a methodological step forward and aligns with the new CPI base year of 2024=100 introduced in the April Monthly Bulletin. The Committee flagged three near-term risks: continued West Asia supply-chain disruption transmitting into energy and input costs, the possibility of El Niño conditions affecting the south-west monsoon and food prices, and global financial market spillovers. On growth, the RBI expressed confidence that India's macro fundamentals remain on a stronger footing than in past crisis episodes, but acknowledged that an extended conflict could drag domestic production in FY27.

Sources: HDFC AMC — Monetary Policy Review April 2026  |  RBI MPC April 2026: Repo Rate Held at 5.25%

KEY COMPLIANCE DEADLINES — MAY TO AUGUST 2026

7 MAY 2026 TDS / TCS deposit for April 2026 (transactions on or after 1 April 2026 are governed by Income Tax Act, 2025). Use the Integrated e-Pay challan module on incometax.gov.in.	11 MAY 2026 — THIS MONDAY GSTR-1 for April 2026 (monthly filers). GSTR-1 IFF for QRMP taxpayers (Apr 2026 period). Confirm IMS reconciliation before submission.
15 MAY 2026 TDS certificate issuance for non-salary deductions (specified transactions) for Q4 FY 2025-26. Form 27EQ for TCS Q4 FY 2025-26.	20 MAY 2026 GSTR-3B for April 2026 (monthly filers). Hard block on filing where GSTR-3B ITC exceeds GSTR-2B. GSTR-5 and GSTR-5A also due.
22 MAY 2026 GSTR-3B for April 2026, Category 1 states (AATO up to ₹5 crore). Last date for public comments on RBI Draft PPI Master Direction, 2026.	30 MAY 2026 LLP Form 11. Annual Return of Limited Liability Partnerships for FY 2025-26. Begin data compilation now.
31 MAY 2026 TDS Return Q4 FY 2025-26 (Forms 24Q, 26Q, 27Q, 27EQ). Filed under Income Tax Act, 1961. Form 15CC for authorised dealers (FEMA remittances).	15 JUL 2026 CCFS-2026 amnesty window closes. Last day to file pending ROC returns at 10% of additional fee. No extension expected.
31 JUL 2026 ITR-1 and ITR-2 for AY 2026-27. Salaried individuals and HUFs (non-audit). DIR-3 KYC for all active DINs.	31 AUG 2026 ITR-3 and ITR-4 for AY 2026-27. Non-audit business and professional filers. Extended deadline under Income Tax Act, 2025 transition.

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