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CMA Intermediate · Direct and Indirect Taxation · Exemption from Tax

A notification issued under Section 11(1) of the CGST Act on 1 August 2026 exempts a class of services. The Government wants to clarify its scope by inserting an Explanation. What is the effect of such an Explanation if inserted by notification on 20 June 2027?

Under Section 11(3), an Explanation inserted within one year of the original exemption notification is treated as if it had always been part of that notification. Since 20 June 2027 is within one year of 1 August 2026, it takes retrospective effect.

  1. AIt is invalid, because it was inserted after one year of the original notification
  2. BIt applies only from 20 June 2027 onwards
  3. CIt applies as if it had always been part of the original notification, because it was inserted within one yearCorrect
  4. DIt applies only if the GST Council ratifies it again

Explanation

Section 11(3) permits an Explanation within one year of issue of the notification, and it operates as if it had always been part of that notification. 20 June 2027 falls within one year of 1 August 2026, so it is valid and retrospective in effect. The prospective-only option contradicts the sub-section.

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