The Finance Bill 2025 proposes 11 significant amendments to Goods and Services Tax (GST) provisions, aiming to rectify anomalies, introduce new compliance measures, and clarify legal ambiguities. These changes, effective from April 2025, impact input tax credit (ITC) distribution, tax compliance, and procedural aspects of GST.
Expands the scope of Input Service Distributors (ISD) to include IGST paid on reverse charge transactions.
This correction addresses previous limitations in ITC distribution for inter-state supplies under Sections 5(3) and 5(4) of the IGST Act.
The terms ‘Municipal Fund’ and ‘Local Fund’ are explicitly defined.
Covers funds managed by local government bodies in municipal and panchayat areas, reinforcing the scope of local authorities under GST.
A unique identification system will be introduced for specified commodities.
Businesses dealing with these goods must affix secure, non-removable digital marks or stamps.
Non-compliance could result in penalties of Rs. 1 lakh or 10% of tax payable, whichever is higher.
Aligns the taxability of vouchers with the underlying goods/services instead of treating them separately.
Time of supply provisions will now follow the general GST framework under Sections 12 and 13 of the CGST Act.
Overrides the Apex Court’s ruling in ‘Safari Retreats’ regarding ITC claims for plant and machinery.
ITC on construction of land and buildings is explicitly disallowed, possibly inviting legal challenges.
Ensures that suppliers can only reduce tax liability if the recipient reverses the corresponding ITC.
Addresses cases where credit notes issued for post-sale discounts were being misused.
GSTR-2B statements will no longer be auto-generated but can be regenerated by taxpayers.
Adds inclusivity in ITC reporting by modifying Section 38(2).
Introduces conditions and restrictions for filing GSTR-3B returns to streamline compliance.
Imposes a 10% pre-deposit for cases involving only penalties (excluding tax amounts).
Previously, such pre-deposits applied only to e-way bill violations.
Extends the 10% pre-deposit requirement to penalty-only cases heard by the Appellate Tribunal.
Clarifies that goods warehoused in Special Economic Zones (SEZ) or Free Trade Warehousing Zones (FTZWZ) before export or Domestic Tariff Area (DTA) clearance do not qualify as supplies of goods or services.
This aligns GST treatment with the Special Economic Zones Act 2005.
These amendments seek to enhance compliance, improve tracking mechanisms, and close legal loopholes in GST provisions. However, retrospective changes, especially concerning ITC disallowance, may be subject to judicial review. Businesses should assess the impact of these changes and ensure timely compliance with the new regulations.
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