Analysis of GST Proposals in Finance Bill 2025

ANALYSIS OF THE GST PROPOSALS OF FINANCE BILL, 2025, RECENT CHANGES & LATEST JUDICIAL RULINGS ADV. (CA) ABHAY DESAI

Agenda Proposals of FB, 2025 GST (Clause 116 to 129) Recent changes pertaining to GST GST Rules GST Rates Circulars Latest Judicial Rulings

Proposals of Finance Bill, 2025

Caveat The amendments proposed as per clauses 116 to 119 & 121 to 129 under the CGST Act, 2017 shall come into force from the date to be notified by the Central Government (Clause 1(2)(b)).

Plant and Machinery Clause 119 Substitution of expression to clause (d) of sub-section (5) of Section 17 of the CGST Act, 2017 Sec. 17 (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery plant and machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Accordingly, the definition of plant and machinery as provided under the explanation in Section 17 will also be applicable to Section 17(5)(d). Further, an explanation 2 is proposed to be inserted, Explanation 2. For the purposes of clause (d), it is hereby clarified that notwithstanding anything to the contrary contained in any judgment, decree or order of any court, tribunal, or other authority, any reference to plant or machinery shall be construed and shall always be deemed to have been construed as a reference to plant and machinery . This amendment shall take effect retrospectively from 1st day of July, 2017.

Plant and Machinery Issues Challenge to retrospective legislative action Imposition of interest from which date Meaning of immovable property Own account exclusion Bharti Airtel Ltd. Versus Commissioner of Central Excise (2024) 24 Centax 266 (S.C.) Whether CENVAT Credit is admissible in respect of mobile towers and peripherals? Sterling and Wilson Pvt. Ltd. Versus Joint Commissioner (2025) 26 Centax 301 (A.P.) Is setting up a solar power plant a work contract?

Definition of ISD Clause 116 - Amendment of Clause (61) of Section 2 of the CGST Act, 2017 Section 2 (61) Input Service Distributor means an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9 of this Act or under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20. This amendment will come into effect from April 1, 2025.

Distribution of ITC by the ISD in respect of inter- state supplies on which tax has to be paid on an RCM Clause 120 Amendment of sub-section (1) & (2) of Section 20 of the CGST Act, 2017 Section 20 (1) Any office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub- section (3) or sub-section (4) of section 9, of this Act or under subsection (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017 for or on behalf of distinct persons referred to in section 25, shall be required to be registered as Input Service Distributor under clause (viii) of section 24 and shall distribute the input tax credit in respect of such invoices. Section 20 (2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under sub-section (3) or sub-section (4) of section 9 of this Act or under subsection (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017, paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed. This amendment will come into effect from April 1, 2025.

ISD Provision under GST Law Rule 39 of the CGST Rules, 2017 provides the Procedure for distribution of input tax credit by Input Service Distributor; and Rule 65 of the CGST Rules, 2017 provides the Form and manner of submission of return by an Input Service Distributor

Issues Cost allocation ISD vs. Cross charge Distribution based on turnover Skewed calculation Turnover includes cross charge ITC availability where POS is the location of supplier Limitation for taking ITC t/f through ISD ISD & SEZ New branch Substantial changes in turnover in CY vs. PY Advertisement/travel expenditure Specific vs. common Routing through regular registration Timing differences between reflection in GSTR 6A and transfer through GSTR 6 Unregistered branches Implications on non-compliance

Credit Notes Clause 121 Amendment of proviso to sub-section (2) of Section 34 of the CGST Act, 2017 Proviso to Section 34 (2) Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person. Provided that no reduction in output tax liability of the supplier shall be permitted, if the (i) input tax credit as is attributable to such a credit note, if availed, has not been reversed by the recipient, where such recipient is a registered person; or (ii) incidence of tax on such supply has been passed on to any other person, in other cases.

IMS Clause 122 Amendment to sub-section (1) & (2) of Section 38 of the CGST Act, 2017 Section 38(1) The details of outward supplies furnished by the registered persons under sub-section (1) of section 37 and of such other supplies as may be prescribed, and an auto-generated statement containing the details of input tax credit shall be made available electronically to the recipients of such supplies in such form and manner, within such time, and subject to such conditions andrestrictions as may be prescribed. (2) The auto-generated statement under sub-section (1) shall consist of (a) details of inwardsupplies in respect of which credit of input tax may be available to the recipient;and (b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by the recipient, including on account of the details of the said supplies being furnished under sub-section (1) of section 37,-- (i) by any registered person within such period of taking registration as may be prescribed; or (vi) by such other class of persons as may be prescribed. (c) such other details as may be prescribed.

IMS Clause 123 Amendment to sub-section (1) of Section 39 of the CGST Act, 2017 Section 39(1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time within such time, and subject to such conditions and restrictions, as may be prescribed.

Pre-deposit for filing an appeal before the Appellate Authority Clause 124 Substitution of Proviso to sub-section (6) of Section 107 of the CGST Act, 2017 Section 107(6) No appeal shall be filed under sub-section (1), unless the appellant has paid (a) in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and (b) a sum equal to ten per cent of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed: Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to twenty-five per cent of the penalty has been paid by the appellant. Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty has been paid by the appellant.

Pre-deposit for filing an appeal before the Appellate Tribunal Clause 125 Insertion of Proviso to sub-section (8) of Section 112 of the CGST Act, 2017 Provided that in case of any order demanding penalty without involving demand of any tax, no appeal shall be filed against such order unless a sum equal to ten per cent. of the said penalty, in addition to the amount payable under the proviso to sub-section (6) of section 107 has been paid by the appellant.

Track and trace mechanism for certain goods Clause 127 Insertion of Section 148A of the CGST Act, 2017 Section 148A (1) The Government may, on the recommendations of the Council, by notification, specify, (a) the goods; (b) persons or class of persons who are in possession or deal with such goods, to which the provisions of this section shall apply. (2) The Government may, in respect of the goods referred to in clause (a) of sub-section (1), (a) provide a system for enabling affixation of unique identification marking and for electronic storage and access of information contained therein, through such persons, as may be prescribed; and (b) prescribe the unique identification marking for such goods, including the information to be recorded therein.

Track and trace mechanism for certain goods (3) The persons referred to in sub-section (1), shall, (a) affix on the said goods or packages thereof, a unique identification marking, containing such information and in such manner; (b) furnish such information and details within such time and maintain such records or documents, in such form and manner; (c) furnish details of the machinery installed in the place of business of manufacture of such goods, including the identification, capacity, duration of operation and such other details or information, within such time and in such form and manner; (d) pay such amount in relation to the system referred to in sub-section (2), as may be prescribed. .

Definition of Unique Identification Marking Clause 116 - Insertion of Clause (116A) of Section 2 of the CGST Act, 2017 Section 2 (116A) unique identification marking means the unique identification marking referred to in clause (b) of sub-section (2) of section 148A and includes a digital stamp, digital mark or any other similar marking, which is unique, secure and non-removable; .

Penalty for failure to comply with the track and trade mechanism Clause 126 Insertion of Section 122B of the CGST Act, 2017 Section 122B Notwithstanding anything contained in this Act, where any person referred to in clause (b) of sub-section (1) of section 148A acts in contravention of the provisions of the said section, he shall, in addition to any penalty under Chapter XV or the provisions of this Chapter, be liable to pay a penalty equal to an amount of one lakh rupees or ten per cent. of the tax payable on such goods, whichever is higher.

Track and trace mechanism for certain goods To tackle revenue losses due to tax fraud, the government will use technology to track goods and ensure that all due taxes are collected. A track and trace system is a software-based system that monitors the movement of products or shipments through a supply chain. It can be used to track vehicles, loading units, and other items. How it works: Each item is assigned a unique identifier The system captures and stores information about the item at each stage of the supply chain The information is integrated into a digital database

Track and trace mechanism for certain goods Benefits: Reduces tax evasion by improving product traceability Boosts government revenue through better tax compliance Improves market transparency by preventing illegal trade Real-time information: Provides real-time information about the goods location Challenges: Higher costs for businesses to install tracking systems. Additional compliance requirements may affect the functioning of business operations. Adjustment period needed for industries to transition smoothly.

Schedule III - Supply of goods warehoused in SEZ / FTZWZ before clearance for exports / DTA Clause 128 Insertion of clause (aa) in para 8 of Schedule III of the CGST Act, 2017 Para 8 (a) Supply of warehoused goods to any person before clearance for home consumption; (aa) supply of goods warehoused in a Special Economic Zone or in a Free Trade Warehousing Zone to any person before clearance for exports or to the Domestic Tariff Area; (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption. Explanation 2. For the purposes of clause (a) paragraph 8, the expression "warehoused goods" shall have the same meaning as assigned to it in the Customs Act, 1962 (52 of 1962). Explanation 3 For the purposes of clause (aa) of paragraph 8, the expressions Special Economic Zone , Free Trade Warehousing Zone and Domestic Tariff Area shall have the same meanings respectively as assigned to them in section 2 of the Special Economic Zones Act, 2005. This amendment shall take effect retrospectively with effect from the 1st day of July 2017.

Schedule III - Supply of goods warehoused in SEZ / FTZWZ before clearance for exports / DTA Clause 129 Clarification for clause (aa) in para 8 of Schedule III of the CGST Act, 2017 It has also been clarified that No refund shall be made of all such tax which has been collected, but which would not have been so collected, had section 128 been in force at all material times.

Time of Supply in Respect of Transaction in Vouchers Clause 117 & 118 - Omission of sub-section (4) of Section 12 & sub-section (4) of Section 13 of the CGST Act, 2017 Sections 12(4) and 13(4) of the CGST Act, 2017 which deal with the time of supply of vouchers are proposed to be omitted to resolve ambiguities in the treatment of vouchers. The recent Circular No. 243/37/2024-GST dated December 31, 2024, holding non-applicability of tax on vouchers, consequently there being no need for determination of time of supply thereof

Definition of Local Authority Clause 116 - Amendment of Sub-clause (c) of Clause (69) of Section 2 of the CGST Act, 2017 Section 2 (69) "local authority" means (c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund municipal fund or local fund; After sub-clause (c), the following Explanation shall be inserted, namely: (a) local fund means any fund under the control or management of an authority of a local self government established for discharging civic functions in relation to a Panchayat area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called

Definition of Local Authority (b) municipal fund means any fund under the control or management of an authority of a local self government established for discharging civic functions in relation to a Metropolitan area or Municipal area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called. ;

Recent changes (GST)

Sale of old and used vehicles Sr. No. 4 of Notification No. 8/2018-Central Tax (Rate), dated 25.01.2018 has been amended vide Notification No. 04/2025-Central Tax (Rate) GST to increase the present GST rate of 12% to 18% on the sale of old and used vehicles covered under chapter 87 subject to other conditions provided in the Notification no. 8/2018-Central Tax (Rate), dated 25.01.2018. The increased rate shall be applicable from 16.01.2025 Sr. No. Chapter, Heading, Sub- heading or Tariff item Description of Goods Rate 4. 87 All Old and used Vehicles other than those mentioned from S. No. 1 to S.No.3 6% 9%

Restaurants & catering Notification No. 05/2025-Central Tax (Rate) dated 16.01.2025 makes the following amendments in the notification no. 11/2017-Central Tax (Rate), dated the 28.06.2017. In the said notification, In paragraph 4 relating to Explanation, with effect from the 1st day of April, 2025,- The definition of declared tariff omitted w.e.f. 01.04.2025. The meaning of the word Specified premises has been substituted Clause (xxxvi). (xxxvi) "Specified premises" means premises providing "hotel accommodation" services having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent. (xxxvi) Specified premises , for a financial year, means,- (a) a premises from where the supplier has provided in the preceding financial year, hotel accommodation service having the value of supply of any unit of accommodation above seven thousand five hundred rupees per unit per day or equivalent; or (b) a premises for which a registered person supplying hotel accommodation service has filed a declaration, on or after the 1stof January and not later than 31stof March of the preceding financial year, declaring the said premises to be a specified premises; or

Restaurants & catering (c) a premises for which a person applying for registration has filed a declaration, within fifteen days of obtaining acknowledgement for the registration application, declaring the said premises to be a specified premises. Further, the following annexures have been inserted for the purpose of declaration a. Annexure-VII dealing with opt-in declaration for registered person. b. Annexure-VIII deals with opt-in declaration for a person applying for registration. c. Annexure-IX deals with opt-out declaration where a hotel accommodation supplier declared that the premises is not a specified premises. This declaration should be filed on or after 1stJanuary and not later than 31st March of the preceding financial year. All declarations would apply to the entire financial year and will continue to apply to the subsequent financial year unless a different declaration is given.

Notification No. 13/2017- Central Tax (Rate) Notification No. 13/2017 CTR provides for GST under RCM on services provided by way of sponsorship to any body corporate or partnership firm by any person. Notification No.7/2025 amends Notification No.13/2017. The effective date is 16.01.2025. Against serial number 4, in column (3)(supplier of service), after the words Any person , the words other than a body corporate shall be inserted. Post amendment Where sponsorship services are provided by any person other than body corporates to any body corporate or partnership firm located in the taxable territory RCM continues to apply. Where sponsorship services are provided by a body corporate to any person forward charge mechanism would apply.

Notification No. 13/2017- Central Tax (Rate) Entry 5AB was inserted to Notification No.13/2017-CTR to provide for RCM in respect of services by way of renting of any immovable property other than residential dwelling provided by any unregistered person to any registered person. Amendment through Notification No.7/2025-CTR w.e.f. 16.01.2025 to exclude persons who have opted to pay tax under composition levy from the scope of registered person. Supply of Service by way of renting of any immovable property other than residential dwelling by an unregistered person to a registered person who has opted to pay tax under composition levy is not covered under RCM.

RCM on renting of commercial property - Circular No. 245/02/2025-GST dated 28.01.2025 Entry No. 5AB in Notification No. 13/2017-CTR dated 28.06.2017 vide the Notification No. 09/2024 CT(R) dated 08.10.2024 was inserted to provide for the payment of GST under RCM on the renting of commercial immovable property by an unregistered person to a registered person by the registered recipient including taxpayers registered under composition levy. Further, Notification No. 09/2024 CT(R) dated 08.10.2024 has been amended vide Notification No. 07/2025 - Central Tax (Rate) dated 16.01.2025 to exclude the taxpayers registered under composition levy from the liability of GST under RCM on the renting of commercial immovable property from an unregistered person. Hence for the intervening period (i.e., date of effect of notification No. 09/2024-CTR dated 08.10.2024 to date of issuance of amending notification No. 07/2025-CT(Rate) dated 16.01.2025) the payment of GST under RCM on the service of renting of commercial immovable property taken from un-registered person by taxpayers registered under composition levy is regularized on 'as is where is' basis for the period from 10.10.2024 to 15.01.2025.

Rule 16A- Grant of temporary identification number A new rule 16A was inserted in Central Goods and Services Tax Rules, 2017,vide notification No. 07/2025 Central Tax dated 23.01.2025,with effect from a date to be notified, which reads as under: 16A. Grant of temporary identification number. - Where a person is not liable to registration under the Act but is required to make any payment under the provisions of the Act, the proper officer may grant the said person a temporary identification number and issue an order in Part B of FORM GST REG-12. Sub-rule (4),of rule 87 of Central Goods and Services Tax Rules, 2017 has also been amended to insert the words as per rule 16A after the words common portal , with effect from a date to be notified. Effect of the amendment With the insertion of Rule 16A, the proper officer is now authorized to grant a Temporary Identification Number (TIN) to any person for making any payments under the provisions of the Act, even if they are not required to register under the Act. Previously, there was no mechanism in place for issuing a Temporary Identification Number in the absence of a registration requirement.

Waiver of late fees for delay in furnishing of FORM GSTR-9C Notification No. 08/2025 CENTRAL TAX dated 23.01.2025 waives of the late fees payable in respect of FORM GSTR 9C up to FY 2022-23, which is in excess of fees payable up to the date of furnishing FORM GSTR 9, in case where registered person fails to furnish reconciliation statement in FORM GSTR-9C along with the annual return in FORM GSTR-9 and furnish the said statement in FORM GSTR-9C, subsequently on or before the 31stMarch, 2025. Hence as per the above notification, a registered person who has filed FORM GSTR 9 within due date without FORM GSTR 9C but subsequently files the FORM GSTR 9C by 31stMarch, 2025, then no late fee is payable in respect of late filing of Form GSTR 9C.

Waiver of late fees for delay in furnishing of FORM GSTR-9C Circular No. 246/03/2025-GST dated 30.01.2025 has been issued to provide clarification on the applicability of a late fee for delay in furnishing of FORM GSTR-9C. The said circular states that, in cases where a reconciliation statement in FORM GSTR-9C was required to be furnished along with the return in FORM GSTR-9, but was not furnished so for any financial years up to FY 2022-23, and has been furnished subsequently on or before 31st March 2025, then no additional late fee shall be payable for delayed furnishing of FORM GSTR-9C which is in excess of the late fee payable under section 47 up to the date of furnishing FORM GSTR-9 for the said financial year.

Guideline for arrest and bail in relation to offences punishable under CGST Act, 2017 Para 4.2.1 of the Instruction No. 2/2022-23 dated 17.08.2022 has been amended by Instruction No. 01/2025-GST dated 13.01.2025. The grounds of arrest must be explained to the arrested person and this fact must be noted in the arrest memo. (Para 4.2.1 before amendment). The grounds of arrest must be explained to the arrested person and also furnished to him in writing as an Annexure to the Arrest Memo. Acknowledgement of the same should be taken from the arrested person at the time of service of the Arrest Memo (Amended para 4.2.1). The said para has been amended in view of the Judgement of the Hon'ble Supreme Court in the case of M/s. PRABIR PURKAYASTHA Vs STATE (NCT OF DELHI), CRIMINAL APPEAL (D. No. 42896/2023) providing the distinction between 'reasons for arrest' and 'grounds of arrest . Hence after amendment of the said para the grounds of arrest must be informed to the arrested person in writing.

GST 245/02/2025-GST dated 28.01.2025 on penal charges - Circular No. Vide Para 2 of Circular No. 245/02/2025-GST dated 28.01.2025 it has been clarified that the penal charges being levied by the Regulated Entities (REs) in view of RBI instructions dated 18.08.2023 directing such Regulated Entities (REs) to levy penal charges in place of penal interest are to deter the act of non-compliance with loan terms; such amounts are for preventing breach of contract or non-performance and are thus mere events in a contract. It has been further clarified that the essence of a contract is its performance and not its breach , meaning thereby that parties enter into a contract for execution and not for its breach. Hence no GST is payable on the penal charges levied by Regulated Entities, in compliance with RBI directions dated 18.08.2023, for non-compliance with material terms and conditions of the loan contract by the borrower. The given circular has been issued in line with Circular No. 178/10/2022-GST dated 03.08.2022 issued earlier as well as settled legal jurisprudence.

Services provided to MCD Headquarters - Circular No. 245/02/2025-GST dated 28.01.2025 Vide Para 6 of Circular No. 245/02/2025-GST dated 28.01.2025 it has been clarified that housekeeping, civil maintenance, furniture maintenance and horticulture services provided to Municipal Corporation of Delhi (MCD) Headquarters are for the upkeep of their office and hence not covered under the exemption entry No. 3A of the Notification No. 12/2017-CTR dated 28.06.2017. These services are not supplied in relation to performing any functions entrusted to a Municipality under Article 243W of The Constitution of India. Such services are not covered under the scope of entry at Sr. No. 3A of notification No. 12/2017-CTR dated 28.06.2017.

Recent important decisions

Recent important decisions Kamal Envirotech Pvt. Ltd. Versus Commissioner of GST (2025) 26 Centax 332 (Del.) Whether penalty u/s 129 is statutory or not? Central Electricity Regulatory Commission Versus Additional Director Directorate General of GST Intelligence (2025) 26 Centax 239 (Del.) Whether the functions performed by CERC are liable to tax? Gujarat Chamber of Commerce and Industry Versus Union of India (2025) 26 Centax 150 (Guj.) Whether the assignment of leasehold rights of the GIDC plot is liable to tax? Brunda Infra Pvt. Ltd. V. Additional Commissioner of Central Tax (2025) 26 Centax 94 (Telangana) Whether notifications extending the period of limitation u/s 73 valid?

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