Tax Digest: Week ended 22 Aug, 2025

Weekly Tax Digest 🇮🇳

🏢 GST Law & Compliance

[CRITICAL]🚨 E-Invoicing Threshold Lowered to ₹2 Crore Turnover

Type: Notification Authority: CBIC Date: 20-Aug-2025

The CBIC has lowered the mandatory e-invoicing threshold for B2B transactions from ₹5 Crore to ₹2 Crore. This move significantly expands the scope of e-invoicing to include a large number of small and medium-sized enterprises (SMEs).

💡 Practical Insight: This is a high-priority compliance change. Businesses with an annual turnover between ₹2 Cr and ₹5 Cr must immediately integrate their billing systems with an IRP (Invoice Registration Portal).

• Effective Date: 📅 01-Oct-2025
• Action: Assess ERP/accounting software readiness and select a GSP/ASP. Failure to comply will result in invalid invoices and loss of ITC for recipients.

🧾 Income Tax Updates

💼 CBDT Clarifies Valuation Rules for Startup ESOPs

Type: Circular Authority: CBDT Date: 19-Aug-2025

The CBDT has issued a much-awaited circular providing clear guidelines on the valuation of unquoted equity shares for calculating perquisite tax on ESOPs, specifically for DPIIT-recognized startups. This resolves ambiguity around Fair Market Value (FMV) calculation, particularly during funding rounds or strategic sales.

💡 Practical Insight: This brings relief to startups and their employees. The circular specifies using the valuation certificate from a Merchant Banker at the time of the latest funding round, providing a stable and predictable tax basis. CFOs should revisit their ESOP policies and employee tax calculations.

🏛️ Recent Important Tax Judgments

🧑‍⚖️ Landmark Clarification: Supreme Court Allows ITC on CSR Expenses

Type: Supreme Court Judgment Authority: Supreme Court of India Date: 18-Aug-2025

In a landmark ruling, the Supreme Court has held that Input Tax Credit (ITC) is permissible on goods and services used for Corporate Social Responsibility (CSR) activities, provided these activities are mandated under the Companies Act, 2013. The court reasoned that mandatory CSR is an expenditure "in the course or furtherance of business."

💡 Practical Insight: This judgment settles a highly contentious issue and provides significant financial relief to corporates. Businesses that previously did not claim or reversed ITC on CSR can now review past filings and potentially claim credit, subject to time limits. 👉 Consult your CA immediately if this applies to your case.

🗂️ Compliance & Portal Updates

📅 GSTN to Launch Form GSTR-1A for Amending B2B Invoices

Type: Technical Advisory Authority: GSTN Date: 21-Aug-2025

The GST Network has announced the phased rollout of Form GSTR-1A, a new functionality allowing suppliers to amend details of B2B invoices already uploaded in GSTR-1. This feature will be available before the recipient files their GSTR-3B, enabling corrections without issuing credit/debit notes for minor errors.

💡 Practical Insight: This is a welcome process improvement that will reduce compliance friction. It allows for correcting clerical errors (like incorrect GSTIN or invoice number) before the data populates in the recipient's GSTR-2A/2B, thus preventing ITC mismatches and disputes. The feature is expected to go live from the September 2025 return period.

Disclaimer: This is a summary of tax developments and not professional advice. Please consult with a tax professional for specific guidance.