The Hon’ble Finance Minister presented the Union Budget 2025, proposing several changes in indirect tax regulations. Below are the key Indirect tax amendments, for your perusal.
Amendments in GST law:
- Mandatory ITC reversal for credit notes: Proviso to Section 34(2) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) is being amended requiring reversal of input tax credit (ITC) claimed by the recipient on credit notes, for reducing the supplier’s tax liability.
- Overruling of Safari Retreat judgment: Section 17(5)(d) of the CGST Act is being amended retrospectively from 1 July 2017 to replace "plant or machinery" with "plant and machinery". Further, an explanation has been inserted to provide an overriding effect to any contrary Court judgments or orders.
- ISD distribution of reverse charge credit: Section 2(61) of the CGST Act is being amended (effective 1 April 2025) to explicitly allow ISDs to distribute ITC on inter-state supplies subject to reverse charge. Corresponding changes have been made in Section 20 of the CGST Act.
- Enabling provisions for return filing and IMS implementation: Sections 38 and 39 of the CGST Act are being amended to introduce enabling clauses for prescribing additional details in ITC statements and imposing conditions/ restrictions on return filing.
- No GST on transaction in vouchers: Section 12(4) and 13(4) of the CGST Act, relating to the time of supply for vouchers, are being omitted. This is in line with clarification issued vide Circular No. 243/ 37/ 2024 dated 31 December 2024 wherein it was provided that GST is not applicable on sale of vouchers, as they do not qualify as goods or services.
- Mandatory 10% pre-deposit for appeals against demand solely of penalty: Sections 107(6) and 112(8) of the CGST Act are being amended to mandate a 10% pre-deposit of the penalty amount for appeals before the Commissioner (A) and Tribunal in cases involving only penalty demands, with no tax liability.
Other miscellaneous GST amendments:
- No GST on supply of warehoused goods in SEZ/ FTWZ: Schedule III of the CGST Act is being retrospectively amended (w.e.f. 1 July 2017) by inserting para 8(aa), clarifying that the supply of goods warehoused in SEZs or FTWZs before export clearance or sale to the Domestic Tariff Area will not be treated as a supply of goods or services. However, no refunds will be granted for taxes already paid on such transactions.
- Track and Trace mechanism: New Sections viz. 148A, 122B, 2(116A) of the CGST Act have been inserted in the CGST Act to enable a Track and Trace mechanism for specified commodities and to provide penal provisions. Government to notify the list of products and class of persons who are in possession or deal with such goods.
- Amendment in the definition of “Municipal or Local Fund”: Section 2(69)(c) of the CGST Act is being amended to replace "municipal or local fund" with "municipal fund or local fund," with an additional explanation to clarify its scope.
Amendment in Customs Act, 1962
1. Finalization of Provisional Assessment Within a Time-Bound Manner
- A new sub-section (1B) is being inserted in Section 18 of the Customs Act, 1962 (‘Customs Act’) to provide a definite time limit of two years for finalizing provisional assessments. This period may be extended by the Commissioner of Customs for an additional year, subject to specified conditions.
- For pending cases, the two-year time limit shall be reckoned from the date of assent to the Finance Bill.
- A new sub-section (1C) is being inserted to specify certain grounds on which the two-year time limit for finalizing provisional assessments shall remain suspended
2. Revision of Bill of Entry: A new Section 18A is being inserted to the Customs Act to allow voluntary revision of the bill of entry post clearance of goods, within a prescribed timeframe and subject to specified conditions. This section will not apply in cases where audit, search or seizure proceedings have been initiated by the department.
3. Refund pursuant to revision of Bill of Entry: The limitation period for claiming a refund consequent to revision of bill of entry under Section 18A or an amendment under Section 149 of the Customs Act shall be one year from the date of payment of duty or interest.
Enclosed the copy of finance bill and the memorandum, for your reference.
