The Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman presented the Union Budget 2024-25 in Parliament, today i.e. February 02, 2025.  Majorly the changes were earlier recommended by the GST Council in its 55th GST Council Meeting held on 21.12.2024. The key highlights of the proposed changes under GST Law are as follows:

The Key Highlights of the Budget relates to:

A. Amendment in Section 2 i.e. Definitions 

• Amendment in Section 2(61) – Input Service Distributor – To explicitly include interstate Reverse Charge Mechanism (RCM) transactions under ISD, by including reference to supplies subject to tax under section 5(3) and 5(4) of IGST Act, 2017 in the said provisions. 
• Amendment in Section 2(69) Clause (c) – Local Authority  – Currently, Clause (c) defines “local authority” and references funds like Local Fund and Municipal Fund without a detailed definition. 

Insertion of Explanation – An Explanation will be added under clause (c) of Section 2(69) to define the terms Local Fund and Municipal Fund explicitly.

“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;

“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.’

• Insertion of definition of “unique identification marking” 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;’

This is to insert an enabling provision in CGST Act, 2017 through Section 148A so as to empower the government to enforce the Track and Trace Mechanism for specified evasion-prone commodities.

B. Omission of Certain Provisions from the CGST Act, 2017 and CGST Rules, 2017 relating to Vouchers: To Omit Sections 12(4) and 13(4) of the CGST Act, 2017,

Current Scenario:

• Provision of Section 12(4) and Section 13(4) of the CGST Act, 2017 provides the time of supply in case of Vouchers i.e.

Section	Situation	Time of Supply
Section 12(4): Time of Supply in case of Vouchers exchangeable for goods	Supply is identifiable at the point at which voucher is identified	Date of issuance of the voucher.
	Supply is not identifiable at the point at which voucher is identified	Date of redemption of voucher.
Section 13(4): Time of Supply of services in case of vouchers	Supply is identifiable at the point at which voucher is identified	Date of issuance of the voucher.
	Supply is not identifiable at the point at which voucher is identified	Date of redemption of voucher.

C. Amendment in Section 17(5) to replace phrase “plant or machinery” with “plant and machinery”, retrospectively, with effect from 1 July 2017:  

• To replace the plant or machinery” with “plant and machinery” used in Section 17(5) of the CGST Act, 2017.
• Insertion of Explanation – To clarify that “plant or machinery” should always be understood as “plant and machinery,” even if there’s a previous judgment, decree, or order that might suggest otherwise. The clarification applies retroactively, meaning it overrides earlier interpretations made by courts, tribunals, or other authorities. The phrase “notwithstanding anything to the contrary” ensures that this clarification takes priority over any conflicting decisions or legal precedents.

D. Amendment in Section 20 i.e. Manner of distribution of credit by Input Service Distributor

To explicitly include interstate Reverse Charge Mechanism (RCM) transactions under ISD, by including reference to supplies subject to tax under section 5(3) and 5(4) of IGST Act, 2017 in the said provisions. Also, similar amendment proposed to be made under various sections of CGST Act. These amendments to be made effective w.e.f. 01.4.2025.

E. Amendment in Proviso to Section 34(2) relating to the output tax liability of a supplier when issuing a credit note

Section 34(2) of the CGST Act, allows a supplier to reduce their output tax liability when a credit note is issued.

Amendment in the Proviso: New Conditions for Reduction in Output Tax Liability

Reduction will not be allowed if:

(i) Input Tax Credit (ITC) is not reversed by the recipient: If the recipient (buyer) has already claimed ITC on the original invoice and hasn’t reversed that ITC after receiving the credit note, the supplier cannot reduce their output tax liability.

(ii) Incidence of tax has been passed on to another party (in other cases): If the tax burden has already been shifted to a third party (e.g., a consumer), the supplier cannot claim a reduction in their tax liability.

F. Amendment in Section 38 relating to furnishing details of inward supplies :

G. Amendment in Section 39 relating to furnishing of returns

Introduction of Conditions and Restrictions – The amendment allows the government to specify conditions and restrictions for filing returns in addition to prescribing the timeline. By adding “conditions and restrictions,” the government gets more flexibility to introduce specific rules for return filing through ) without amending the GST Act.

H. Amendment in Section 107(6) – for reducing the amount of pre-deposit required to be paid for filing of appeals before Appellate Authority under for demand involving Penalty only 

To reduce the amount of pre-deposit for filing of appeals before Appellate Authority for cases where the dispute is only regarding penalties and not the actual tax demand. The pre-deposit quantum to be reduced to 10% of the penalty amount from current 25% of the penalty amount.

As per Section 107(6) of the CGST Act, 2017, provides that no appeal before the Appellate Authority shall be filed against an order u/s 129(3), unless a Specified percentage of penalty involved has been deposited as pre-deposit. Further, Section 129(3) of the CGST Act, is that the proper officer detaining or seizing goods or conveyances shall issue a notice in ‘FORM GST MOV-07' within seven days of such detention or seizure, specifying the tax and penalty payable.

I. Amendment in Section 112 – to provide the quantum of pre-deposit to be deposited with the Appellate Tribunal against the order of Appellate Authority in cases involving only penalty us/ 129(3). 

Insertion of new proviso to section 112(8) of CGST Act, 2017 providing for payment of pre- deposit at 10% for filing appeals before Appellate Tribunal in cases involving only demand of penalty without involving the demand of tax.

J. Insertion of new Section 122B – Penalty for failure to comply with track and trace mechanism

• The person violating Section 148A (newly insertion section the finance Bill) will be liable for an additional penalty: Whichever is higher between the following:
  • ₹1,00,000 (a fixed amount).
  • 10% of the tax payable on such goods.
• Additional to Other Penalties: This penalty is in addition to any other penalties already specified under Chapter XV.

K. Insertion of New Section 148A – Track and trace mechanism for certain goods

To insert an enabling provision in CGST Act, 2017 through Section 148A so as to empower the government to enforce the Track and Trace Mechanism for specified evasion-prone commodities

Earlier, the Council in 55th Meeting took a significant move to plug leakage had approved a proposal to implement ‘Track and Trace Mechanism' for specified evasion-prone commodities, under which a unique mark will be affixed on such goods or packages to trace them throughout the supply chain. The introduction of the Track and Trace Mechanism will help authorities monitor and trace goods throughout the supply chain, significantly reducing the possibility of tax evasion, under-invoicing, or other fraudulent activities.

L. Amendment in Schedule III of the CGST Act

• Insertion of Clause (aa) in Paragraph 8 of Schedule III w.e.f. 01.07.2017 –  To provide Transactions involving goods warehoused in an SEZ or FTWZ (Free Trade Warehousing Zone) before their clearance for exports or to the Domestic Tariff Area (DTA) will not be treated as a supply of goods or services under GST, and the same would not attract GST.

Currently, Clause 8(a) of Schedule III, provides that Supply of warehoused goods to any person before clearance for home consumption shall be treated neither as a supply of goods nor supply of services. In the subject case the supply of warehoused goods is of two types, namely;

1. 1. Clearance from Bonded Warehouses to the vessels, and
   2. Clearance from Non-Bonded Warehouses to the vessels.

The Finance Bill, 2024 relating to GST portion can be accessed at https://taxo.online/wp-content/uploads/2025/02/Finance_Bill-2025-Gst.pdf

The Complete Finance Bill, 2024 can be accessed at https://taxo.online/wp-content/uploads/2025/02/Finance_Bill-2025.pdf