The Union Budget 2025 presented on 1st February, 2025 proposed certain changes in GST. The changes and its impact are as follows.
For a detailed clause-by-clause comparison of the old and new provisions in Budget 2025, check out our blog: “Budget 2025: Clause-by-Clause GST Comparison – Old vs New Provisions Explained.”
1. Distribution of ITC by Input Service Distributor (ISD) for RCM supplies
Clause No.: 116
Amendment: Clause (61) of Section 2 is amended to allow ISD to distribute ITC for inter-state supplies subject to RCM, referencing Section 5(3) and 5(4) of IGST Act.
Impact: Clarifies ISD mechanism for businesses distributing ITC related to RCM.
Effective Date: 1st April 2025
2. Definition of ‘Local Authority’
Clause No.: 116
Amendment: Sub-clause (c) of Clause (69) of Section 2 is amended to replace “municipal or local fund” with “municipal fund or local fund”, along with an Explanation defining these terms.
Impact: Removes ambiguity in tax treatment of local authorities.
Effective Date: To be notified
3. Definition of Unique Identification Marking (UIM) for Track and Trace
Clause No.: 116
Amendment: New Clause (116A) in Section 2 defines Unique Identification Marking for Track and Trace mechanism.
Impact: Enables implementation of a Track and Trace system for specific goods
Effective Date: To be notified
4. Deletion of Time of Supply for Vouchers
Clause No.: 117, 118
Amendment:
- Section 12(4) (time of supply for vouchers) deleted.
- Section 13(4) (time of supply for vouchers) deleted.
Impact: Removal of specific provisions for vouchers. The same being neither supply of goods nor supply of services.
Effective Date: To be notified
5. Clarification on ITC Restriction for Plant & Machinery
Clause No.: 119
Amendment: Section 17(5)(d) amended to replace “plant or machinery” with “plant and machinery”.
Impact: Clarifies ITC eligibility, removing any misinterpretation and applies retrospectively. This effectively nullifies effects of the apex court Judgement in case of Saffari Retreats
Effective Date: 1st July 2017 (Retrospective Effect)
6. ISD ITC Distribution for RCM Supplies in Section 20
Clause No.: 120
Amendment: Section 20(1) and 20(2) of CGST Act,2017 amended to explicitly allow ISD to distribute ITC for inter-state supplies under RCM.
Impact: Ensures correct distribution of ITC by ISD.
Effective Date: 1st April 2025
7. Mandatory ITC Reversal for Credit Notes
Clause No.: 121
Amendment: Proviso to Section 34(2) amended to require ITC reversal by recipient before supplier can adjust tax liability via credit notes.
Impact: Strengthens compliance by ensuring credit reversal before tax reduction.
Effective Date: To be notified
8. Removal of ‘Auto-Generated’ from ITC Statement
Clause No.: 122
Amendment:
- Section 38(1) – Omission of “auto-generated” regarding ITC statement.
- Section 38(2) – Omission of “auto-generated” and insertion of “including” for more inclusivity.
Impact: Allows flexibility in the statement format for GST returns.
Effective Date: To be notified
9. Additional Details in ITC Statement
Clause No.: 122
Amendment: New Section 38(2)(c) inserted to prescribe additional details in ITC statement.
Impact: Provides flexibility for additional prescribed details to be included in the statement
Effective Date: To be notified
10. Conditions & Restrictions for GSTR-3B Filing
Clause No.: 123
Amendment: Section 39(1) amended to include an enabling provision for prescribing conditions & restrictions for return filing.
Impact: Adds conditions and restrictions to the requirements for furnishing returns, providing more regulatory control over the return filing process.
Effective Date: To be notified
11. Mandatory Pre-Deposit for Penalty-Only Appeals (First Appeal)
Clause No.: 124
Amendment: Section 107(6) amended to mandate 10% pre-deposit of penalty for appeals against order involving penalty only and without tax/interest demand.
Impact: Provides 10 % as pre deposit for appeal against order of penalty only
Effective Date: To be notified
12. Mandatory Pre-Deposit for Penalty-Only Appeals (Tribunal Appeal)
Clause No.: 125
Amendment: Section 112(8) amended to mandate 20% pre-deposit of penalty for appeals before Appellate Tribunal against order involving penalty only and without tax/interest demand.
Impact: Provides 10 % as pre deposit for appeal against order of penalty only
Effective Date: To be notified
13. Penalty for Violation of Track & Trace Mechanism
Clause No.: 126
Amendment: New Section 122B inserted to impose penalty for non-compliance with Track and Trace regulations. higher of ₹1 lakh or 10% of tax payable on goods.
Impact: Introduces penalty provisions for non-compliance with track and trace mechanisms – higher of ₹1 lakh or 10% of tax payable on goods
Effective Date: To be notified
14. Enabling Track & Trace Mechanism
Clause No.: 127
Amendment: New Section 148A inserted to enable Track & Trace Mechanism for specified goods.
Impact: Strengthens supply chain monitoring of specific goods.
Effective Date: To be notified
15. Tax Treatment of Supplies in SEZ/FTWZ (Retrospective Effect)
Clause No.: 128
Amendment:
- New Clause (aa) in Paragraph 8 of Schedule III inserted to clarify that supply of goods in SEZ/FTWZ before clearance for export or DTA is not a supply.
- Explanation 2 amended to clarify applicability.
- Explanation 3 inserted to define ‘SEZ’, ‘FTWZ’, and ‘DTA’.
Impact: Removes ambiguity; ensures retrospective non-taxability of these transactions.
Effective Date: 1st July 2017 (Retrospective Effect)
16. No Refund for Certain Transactions in SEZ/FTWZ (Retrospective Effect)
Clause No.: 129
Amendment: Specifies that no refund of tax already paid shall be granted for transactions affected by Clause 128.
Impact: Prevents refund claims based on retrospective changes.
Effective Date: 1st July 2017 (Retrospective Effect)
To go Back to Budget Mini Updates: Budget 2025 Mini Updates