• Amendment to Clause (c) of Section 2(69). In the said definition under clause (c) the word ‘fund’ shall be inserted after the word ‘municipal’
• 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.

Explanation. –– For the purposes of this sub-clause–

(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;

(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.

Rationale for the proposed amendment: The amendment aims to clarify the legislative intent behind Section 17(5)(d) of the CGST Act, which restricts Input Tax Credit (ITC) on certain items, including plant and machinery.

The original wording, “plant or machinery,” created ambiguity about whether ITC applies to both plant and machinery together or only to one of them. To remove this confusion, the amendment replaces it with “plant and machinery,” ensuring both are treated as a single unit. 

Additionally, the explanation at the end of Section 17 of the CGST Act explicitly defines “plant and machinery” for legal purposes. This amendment aligns the language of Section 17(5)(d) with this definition, promoting consistency in interpretation across the Act.

The amendment also seeks to insert an Explanation clarifying that it is made notwithstanding any judgment, decree, or order from any court or other. 

The Finance Bill 2025 proposed to amend the proviso to Section 34(2) of the CGST Act, 2017 to explicitly mandate the reversal of input tax credit (ITC) by the registered recipient, if availed, for a credit note to reduce the supplier’s tax liability.

Additionally, it seeks to remove the condition requiring that the incidence of interest on the supply has not been passed on, for the purpose of reducing the supplier’s tax liability in respect of the credit note.

With the Introduction of Invoice Management System (IMS) (optional facility), the Taxpayer can accept/reject/keep pending the invoice/record on IMS after due verification from his accounts. The ITC for the rejected record will not be available to the recipient in the GSTR 2B. Further, input tax credit is being auto – populated in GSTR 3B of the taxpayer on the basis of portal-based input tax credit made available in his GSTR 2B. 

Thus, only the accepted invoices by the recipients would become part of their GSTR-2B as their eligible ITC, due to this manual intervention by the taxpayer such a statement cannot be said to be auto generated statement as per section 38 thus the proposed amendment in the act.

Thus, the substitution in section 38 for the word “Auto Generated Statement” word “statement” is proposed to be substituted.

The amendments are tabulated as below:

This measure aims to enhance transparency and ensure accurate tax reporting throughout the supply chain. It’s essential for businesses dealing with specified commodities to familiarize themselves with these requirements to avoid substantial penalties.

This system mandates the use of a Unique Identification Marking (UIM) on specified goods or their packaging, allowing for end-to-end monitoring across the supply chain. The UIM will include key details such as the date and location of manufacture, production shift, machine used, product description, quantity, maximum retail price, and the intended market for sale. By scanning the UIM, authorities can trace the movement of goods from the point of manufacture to the end consumer, thereby reducing instances of tax evasion and ensuring compliance with GST regulations.

Furthermore, Section 2(116A) of the CGST Act, 2017, defines “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 nonremovable.

The introduction of the Unique Identification Marking under the GST framework represents a significant step towards enhancing supply chain transparency and strengthening tax compliance in India.

• Insertion of Clause (aa) in Paragraph 8 of Schedule III, effective retrospectively from July 1, 2017, clarifying that transactions involving goods warehoused in a Special Economic Zone (SEZ) or Free Trade Warehousing Zone (FTWZ) before their clearance for export or supply to the Domestic Tariff Area (DTA) will not be treated as a supply of goods or services under GST and will not attract GST.
• Insertion of Explanation 3 to specify that the terms “Special Economic Zone,” “Free Trade Warehousing Zone,” and “Domestic Tariff Area” will carry the same meanings as defined in Section 2 of the Special Economic Zones Act, 2005.

It is also specified that no refund will be issued for any tax already collected on such transactions, which would not have been collected had Clause (aa) been in force at all relevant times.

This amendment aligns the treatment of goods warehoused in SEZs or FTWZs with the existing GST provisions for goods stored in customs bonded warehouses, ensuring uniformity in tax treatment.