Finance Minister Nirmala Sitharaman on Saturday announced changes in the Goods and Services Tax (GST) laws under the Union Budget 2025-26 in a bid to ensure trade facilitation.
Presenting the Union Budget 2025, Sitharaman proposed several amendments in GST laws including, provision for distribution of input tax credit by Input Service Distributor (ISD) in respect of inter-state supplies on which tax has to be paid on reverse charge basis with effect from April 1, a new clause to provide definition of Unique Identification Marking (UIM) for implementation of Track and Trace Mechanism.
It also contains provisions for reversal of corresponding input tax credit required in respect of a credit-note, if availed, for the purpose of reduction of tax liability of the supplier, 10 per cent mandatory pre-deposit of penalty amount for appeals before Appellate Authority in cases involving only demand of penalty without any demand for tax and provision for penalties for contraventions of provisions related to the Track and Trace Mechanism.
Besides this, it include provision in Schedule III of the CGST Act, 2017 stating that the 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 shall be treated neither as supply of goods nor as supply of services. Also no refund of tax already paid will be available for such transactions. This will be applicable with effect from July 1, 2017.
The other changes proposed by the Finance Minister are inclusion of definitions of ‘Local Fund’ and ‘Municipal Fund’ used in the definition of “local authority”, and certain conditions and restrictions for filing of return.
These changes will be brought into effect from a date to be notified in coordination with States, as per recommendations of the GST Council.