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India GST measures 2025 Finance Bill

Summary of The Finance Bill 2025 and Amendments to the CGST Act

The Finance Bill 2025, submitted on 1 February, contains a number of changes to the Goods & Services Tax (GST) regime. These changes aim to simplify tax compliance, streamline tax treatment for specific transactions, and enhance regulatory oversight.

1. Distribution of Input Tax Credit (ITC) by Input Service Distributors (ISD)

The Bill introduces provisions allowing input service distributors (ISD) to distribute input tax credit (ITC) on inter-state supplies where tax is payable on a reverse charge basis (RCM). This amendment enhances clarity on ITC distribution and helps businesses manage tax liabilities efficiently.

2. Track and Trace Mechanism for Specified Goods

A new track-and-trace mechanism has been introduced for specified goods or classes of persons. The Bill defines unique identification markings and provides for penalties in case of non-compliance. This mechanism strengthens monitoring, prevents tax evasion, and ensures proper tracking of goods such as pharmaceuticals, alcohol, and other regulated items.

3. Deposit Requirement for Appeals in Certain Cases

A new requirement mandates the deposit of 10% of the penalty amount in cases where a penalty is imposed without any demand for tax. This ensures that appeals against penalty orders are filed with a financial commitment, discouraging frivolous litigation.

4. Clarification on Tax Treatment of Warehoused Goods in Special Zones

The Bill retrospectively amends Schedule III of the CGST Act, effective from July 1, 2017, to clarify that the supply of goods stored in Special Economic Zones (SEZs) or Free Trade Warehousing Zones (FTWZs) to any person before clearance for export or movement to the Domestic Tariff Area (DTA) will not be treated as a supply of goods or services. This resolves ambiguities regarding the tax treatment of such transactions and aligns with the principle of export-oriented taxation.

Supplementary  Amendments to the CGST Act

5. Omission of Sections 12(4) and 13(4) – Time of Supply for Vouchers

Sections 12(4) and 13(4), which governed the time of supply for vouchers, have been removed. As a result, the sale or distribution of vouchers in a peer-to-peer (P2P) model will no longer be subject to GST. This simplifies the taxation of vouchers and eliminates uncertainty in digital and prepaid voucher transactions.

6. Introduction of Section 122B – Penalties for Non-Compliance with Track and Trace Regulations

A new penalty provision (Section 122B) has been introduced to enforce compliance with the track-and-trace mechanism under Section 148A. Businesses failing to comply will face a penalty of INR 1 lakh or 10% of the tax payable,whichever is higher. This provision enhances enforcement and ensures adherence to the tracking system.

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