Finance Minister Nirmala Sitharaman presented the Finance Bill 2025 on 01.02.2025, introducing several amendments to the Central Goods and Services Tax Act (CGST). These amendments clarify definitions, ITC distribution, compliance requirements, penalties, and track & trace mechanisms. Below is a detailed breakdown:
Key Amendments and Their Impact
Amendments to Definitions (Clause 116)
| Section | Amendment | Effective Date |
|---|---|---|
| Section 2(61) | Definition of Input Service Distributor amended to explicitly provide for distribution of ITC for inter-State supplies on reverse charge basis. | 01.04.2025 |
| Section 2(69)(c) | Municipal or local fund substituted with municipal fund or local fund. Explanation added to define local fund and municipal fund. | – |
| Section 2(116A) | Unique identification marking introduced for track and trace mechanism. | – |
Removal of Time of Supply for Vouchers
| Clause | Section | Amendment |
| 117 | Section 12(4) | Removes time of supply provision for vouchers, as they are neither goods nor services. |
| 118 | Section 13(4) | Same as above. |
ITC & Input Service Distributor (Clause 119 & 120)
| Section | Amendment | Effective Date |
| Section 17(5)(d) | Plant or machinery substituted with plant and machinery to remove ambiguity for ITC availment. | Retrospective from 01.07.2017 |
| Section 20(1), (2) | ITC distribution clarified for reverse charge-based inter-State supplies. | 01.04.2025 |
ITC Credit Notes & Statements (Clauses 121, 122, 123)
| Section | Amendment |
| Section 34(2) | ITC reversal mandatory for credit notes, removes condition of incidence of interest. |
| Section 38(1), (2) | Removes auto-generated term; makes clause inclusive for other ITC restrictions. |
| Section 38(2)(c) | Enabling clause for additional ITC details in statements. |
| Section 39(1) | Introduces conditions & restrictions for return filing. |
Appeal & Penalty Deposits (Clauses 124, 125)
| Section | Amendment |
| Section 107(6) | 10% pre-deposit required for penalty-only appeals before Appellate Authority. |
| Section 112(8) | 10% pre-deposit required for penalty-only appeals before Appellate Tribunal. |
Track & Trace Mechanism (Clauses 126, 127)
| Section | Amendment |
| Section 122B | Penal provisions for contravention of track & trace regulations. |
| Section 148A | Enables track & trace system for effective monitoring. |
Special Economic Zone (Clause 128)
| Section | Amendment | Effective Date |
| Schedule III (Para 8, Clause aa) | Warehouse supplies in SEZ or FTWZ before clearance to DTA or exports are neither goods nor services. | Retrospective from 01.07.2017 |
| Schedule III (Explanation 2, 3) | Defines SEZ, FTWZ, and DTA. | – |
Refund Restrictions (Clause 129)
| Provision | Amendment |
| Refund Restriction | No refund of tax already paid on these transactions. |
The Finance Bill 2025 brings crucial clarifications to the CGST Act, ensuring better compliance, ITC distribution, and track & trace mechanisms. These changes aim to streamline tax administration and ease interpretation for businesses.
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