Changes in GST and Income Tax during the Financial Year 2024-25
As of February 23, 2025, the government of India has introduced several changes to the Goods and Services Tax (GST) and Income Tax provisions during the Financial Year 2024-25 along with the Union Budgets 2025, which are currently in force or will come into effect on April 1, 2025.
Income Tax Provisions:
• Increased Tax-Free Income Threshold: The tax-free income threshold has been raised to ₹12 lakh, up from the previous ₹7 lakh, under the new tax regime.
• Revised Tax Rates for Higher Incomes: Individuals earning above ₹12 lakh annually will be taxed according to the revamped tax slabs under the new regime.
• Standard Deduction Enhancement: The standard deduction has been increased from ₹50,000 to ₹75,000 under the new tax regime.
• Capital Gains Tax Reforms (effective from 23rd July 2024):
• Short-Term Capital Gains: The tax rate on short-term capital gains from listed equity shares, units of equity mutual funds, and REITs/INVITs has been increased from 15% to 20%.
• Long-Term Capital Gains: A uniform tax rate of 12.5% will be applied across all asset categories, replacing the previous 10% on certain assets and 20% with indexation on others.
• Indexation Removal: Indexation benefits for calculating long-term capital gains on property, gold, and other unlisted assets have been removed.
• Exemption Limit Increase: The exemption limit for long-term capital gains from listed equity shares, equity mutual funds, and business trusts has been increased from ₹1 lakh to ₹1.25 lakh.
• Tax Deducted at Source (TDS) Adjustments:
• Interest Income for Senior Citizens: The TDS exemption limit on interest income for senior citizens has been increased from ₹50,000 to ₹1 lakh.
• Rent Payments: The annual TDS threshold on rent has been raised from ₹2.4 lakh to ₹6 lakh.
• Angel Tax Abolition: The angel tax has been abolished to support the startup ecosystem, effective April 1, 2025.
• Corporate Tax Reduction for Foreign Companies: The corporate tax rate for foreign companies has been reduced from 40% to 35% (effective from 1st April 2024).
• Tax Exemption on National Savings Scheme Withdrawals: Withdrawals from the National Savings Scheme made on or after August 29, 2024, will be exempt from tax.
GST Provisions:
• Changes to GST Laws: Input Tax Credit (ITC) under Section 17(5)
The Central Goods and Services Tax (CGST) Act has undergone amendments, impacting the availability of Input Tax Credit (ITC). Specifically, Section 17(5) has been revised to restrict the non-availability of ITC related to tax payments made under Section 74.
Key Implications
This change allows taxpayers to claim ITC on taxes paid under Section 74 for periods up to Financial Year (FY) 2023-24. However, this relief does not extend beyond FY 2023-24.
Understanding Section 74
Section 74 of the CGST Act pertains to the determination of tax liability in cases involving fraud, willful misstatement, or suppression of facts. The revised Section 17(5) ensures taxpayers are not denied ITC on taxes paid under Section 74 for specified periods.
Effective Date and Objectives
This amendment forms part of the Finance Act, 2024, which introduces several changes to GST laws. Effective from November 1, 2024, the revision aims to provide relief to taxpayers who have paid taxes under Section 74 for periods up to FY 2023-24.
• Invoice Issuance Timeline under Reverse Charge Mechanism: An amendment in Section 31(3)(f) of the CGST Act prescribes the time period for invoice issuance by recipients in cases of supplies from unregistered persons under the reverse charge mechanism.
• Mandatory Filing of GSTR-7: Registered persons required to deduct TDS must electronically furnish Form GSTR-7, regardless of whether any deduction has been made in the said month.
• Refund Restrictions on Exported Goods: No refund of unutilized ITC or integrated tax will be allowed in cases of zero-rated supply of goods subjected to export duty.
• Authorized Representative for Summons Compliance: A new provision allows an authorized representative to appear on behalf of the summoned person before the proper officer in compliance with summons issued.
• Unified Demand Provisions: Insertion of section 74A in the CGST Act provides for determination of tax discrepancies for FY 2024-25 onwards, with a unified limitation period for issuing demand notices and orders, irrespective of fraud or suppression charges. A single limitation period of 42 months (3.5 years) for issuing demand notices and orders, replacing the earlier distinction between cases involving fraud and those that don’t.
Notice Period: Tax officers have 12 months to issue orders from the date of notice issuance, extendable by up to 6 months with proper justification and approval.
Tax Discrepancies: Covers cases where tax has not been paid, has been underpaid, or has been erroneously refunded. Also, includes situations where input tax credit has been wrongly availed or utilized.
Penalty Provisions: Reduced penalties for voluntary disclosure and payment before notice issuance.
• Input Service Distributor (ISD) Mechanism Expansion: Starting April 1, 2025, the ISD mechanism will cover inter-state procurements of services that attract reverse charge. This amendment allows businesses to distribute input tax credit for such services among their units.
• Time Limit on E-Invoice Reporting: Businesses with an annual turnover exceeding ₹10 crore will be required to report e-invoices within 30 days of the invoice date. This measure aims to ensure timely tax payments and streamline the GST ecosystem.
• Omission of Time of Supply Provisions for Vouchers: The omission of Sections 12(4) and 13(4) of the CGST Act aims to clarify that vouchers are not subject to GST at the time of issuance. GST will be applicable only when the voucher is redeemed, simplifying compliance for businesses that issue vouchers.
• Track and Trace Mechanism Implementation: A new Section 148A is proposed to introduce a ‘Track and Trace Mechanism’ for specified commodities, utilizing Unique Identification Marking. Non-compliance may result in penalties.
Penalty Provisions for Track and Trace Violations: Section 122B is proposed to impose penalties for failure to comply with the Track and Trace Mechanism, amounting to ₹1,00,000 or 10% of the tax payable on such goods, whichever is higher.
• Clarification on Supplies in Special Economic Zones (SEZs): Supplies of goods warehoused in SEZs or Free Trade Warehousing Zones to any person before clearance for export or to the Domestic Tariff Area will be treated neither as supply of goods nor as supply of services. No tax refund will be available for such transactions, effective retrospectively from July 1, 2017.
Also Read: TDS and TCS provisions applicable from April 1, 2025
Also Read: Rationalizing TDS: A Deep Dive into Budget 2025’s Proposals
Go To Memorandum
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