Welcome to another Friday, chief!

In today’s edition — Two recent High Court rulings reminded both GST authorities and taxpayers that rules aren’t optional. From audit procedures to input tax credit claims, due process must be followed. Meanwhile, your favourite ChatGPT didn’t get the job it applied for because it “lacks depth”. Its competitor, Claude, walked away with it. Read all about it in The Odd Bit. But first…

GST Rules Matter: Courts

Vishwas Ved

While everyone's busy discussing the great India-US almond war — along with apples, chemicals, textiles, and whatever else made it to the tariff list — some important things are happening closer home, far from the trade headlines and diplomatic noise.

Yes, tariffs are serious. But while Washington and New Delhi spar over import duties, two high courts in India quietly reminded us that when it comes to domestic taxes, particularly GST, not following the rules is not an option. And unlike international negotiations where things could get a bit arbitrary and whimsical, the GST rulebook isn’t up for debate or open to interpretation.

So, here’s what happened in the court rooms:

In rulings delivered last week, both the Delhi High Court and the Gauhati High Court reminded authorities and taxpayers alike that shortcuts and arbitrariness have no place in a rules-based tax system.

Let’s start with Delhi.

No Fast-forward Allowed

Dhruv Medicos Pvt Ltd., a pharma distributor, recently got caught in a classic bureaucratic situation where the GST department did all the talking without paying attention to what the company had to say.

Between March 20 and 25 this year, the company underwent an on-site GST audit. A memo followed, dated March 28, which didn’t reach the company until April 5.

Subsequently, the company asked the tax department to share the basis for its audit findings. The reply did come. A month later on May 14. 

But before the reply was sent to Dhruv Medicos, the department had unilaterally finalised the audit report on April 29 — two weeks before sharing its calculations, and nearly two months before the company could submit its response on June 19.

The company approached the court and said in its petition that the department was violating the CGST Rule 101(4). The rule categorically says that audit findings shall be finalised only after hearing the taxpayer’s side. 

The Delhi High Court agreed. It reminded the department that the word “shall” doesn’t mean “if you feel like it.” 

The court stayed further proceedings and asked that the ₹40.1 lakh deposited under protest be moved into a fixed deposit until things were sorted.

The moral of the story is that you can’t fast-forward due process. When it comes to audits, ticking the legal boxes isn’t optional; it’s mandatory.

Procedure Matters

Meanwhile, in Guwahati, another GST rule, Rule 36(4), was challenged in court. This rule puts a limit on the input tax credit (ITC) to just 105% of the invoices your suppliers have actually uploaded.

The rule appears simple and fair, except when one party in the chain of transactions – in this case the supplier – does not upload the invoices on time. In that case, the vendor loses out on ITC.

Clearly, some companies were unhappy with this because they thought it was unfair. So, they approached the Gauhati High Court. 

Their argument was: “Why should we be penalised if our suppliers didn’t do their paperwork?”

But the court didn’t see merit in this argument. It noted that invoice-matching is an important step in the GST system, and it works only when everyone in the chain follows the rule. 

The court added that if a supplier doesn’t upload the invoice on time, there is no way for the tax department to verify a claim for input credit. 

The court dismissed the plea.

Final Words

The two rulings make it clear that it doesn’t matter whether you're conducting an audit or claiming ITC, rules have to be followed. 

And if a business or the tax department skips a step, the courts are there to intervene and set things straight, but not always in your favour.

24

That’s the number of months that most CFOs spend in their organisations, reveals data from leadership advisory firm Ishwa Consulting. Nearly seven in 10 CFOs exit within 24 months. More than 48% of CFO exits were triggered by mandate misalignment, where the scope of the role evolved after hiring or decision rights remained unclear. Around 31% left for career opportunities, while 20% exited due to performance issues. The report, which tracked the tenures of 300 CFOs across listed and unlisted entities since 2020, establishes that the finance leadership role, once seen as stable, has become one of the most volatile positions in corporate India.

—₹30,444 cr undisclosed income in FY25. The Income Tax department has conducted 465 surveys, leading to detection of undisclosed income of ₹30,444 crore in the 2024-25 fiscal year, Parliament was informed on Tuesday. During FY25, a total of 465 surveys were conducted, which led to detection of the undisclosed income. In FY24 and FY23, 737 and 1,245 surveys were conducted by the I-T department and undisclosed income of ₹37,622 crore and ₹9,805 crore, respectively, were detected.

—GST evasion of ₹7.08 lakh crore. Goods and Services Tax evasion to the tune of ₹7.08 lakh crore has been detected in crackdowns carried out by tax officials in 91,370 cases during the last five financial years from 2020-21 to 2024-25, the Parliament was informed this week. As much as ₹1.79 lakh crore of the evasion amount comprised ITC fraud in as many as 44,938 cases that were detected during the five years. The amount of GST recovered during this five-year period by way of voluntary deposits stood at over ₹1.29 lakh crore.

—JLR names Tata Motors CFO as top boss. British carmaker Jaguar Land Rover named P B Balaji as CEO. He will replace Adrian Mardell, who has been at the helm for three years, and in Tata Motors for more than three decades. Balaji has been Tata Motors' group chief financial officer since late 2017. His appointment is effective in November. He brings over three decades of global experience across finance and supply chain in the automotive and consumer sectors.

—Big Tech will spend $344 billion on AI this year. Tech giants Microsoft, Amazon, Meta, and Alphabet are reportedly on track to funnel $344B into AI this year, not just to lead but to avoid being left behind. Microsoft Corp, which set a $24.2 billion capital spending record last quarter, plans to drop upwards of $30 billion in the current period. Amazon similarly spent $31.4 billion last quarter, almost double what it dropped a year ago, and is maintaining that level of investment. Google owner Alphabet raised its capital expenditures guidance this year to $85 billion.

ICYMI | Heir Loss? No Problem

Missed last week's update? Heirs are stepping away from family businesses. They’re not being rebellious; it’s just a matter of choosing a life beyond a business legacy. Their autonomous move is turning out to be good news for investors, primarily for two reasons: one, there’s no more uncertainty over succession; and two, the day-to-day affairs of the company go into the hands of professionals.

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