GST amendments under Finance Act 2025 effective from 1 October

GST amendments under Finance Act 2025 effective from 1 October 2025

The Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 16/2025 – Central Tax on 17 September 2025. This notification brings certain provisions of the Finance Act, 2025 into effect from 1st October 2025. The changes mainly relate to amendments in the Goods and Services Tax (GST) law, covering input tax credit, returns, appeals, and compliance measures.

Let’s break down the notification, its purpose, and what it means for businesses.

1. Legal Background

• The notification is issued under Section 1(2)(b) of the Finance Act, 2025.
• This clause allows the Government to notify the start date for specific provisions instead of bringing the whole Act into force at once.
• Such staggered implementation ensures businesses and the GST portal have enough time to adapt.

2. Provisions Coming Into Force

Effective 1 October 2025, the following parts of the Finance Act, 2025, will apply:

• Clauses (ii) and (iii) of Section 121
• Sections 122, 123, and 124
• Sections 126 to 134

These sections mostly amend the Central Goods and Services Tax (CGST) Act, 2017, focusing on compliance, appeals, and anti-evasion measures.

3. Key Areas of Change

a) Input Tax Credit (Section 121 – clauses ii & iii)

• Stricter timelines and documentation rules for claiming ITC.
• Possible reversal requirements for unmatched or disputed invoices.

b) Credit Notes, Returns & Appeals (Sections 122–124)

• Section 122: Changes in issuing credit/debit notes, likely shifting to more electronic processes.
• Section 123: Amendments to GSTR-3B and related return filing provisions.
• Section 124: Changes in the appeal process, including faster timelines and higher pre-deposit requirements.

c) Compliance & Penalties (Sections 126–134)

• New penalties for issues like non-compliance with e-invoicing.
• Provisions for provisional attachment of property during investigations.
• Amendments to provisions on audits, inspections, detention of goods, and tax recovery.
• Clarifications in Schedule III on transactions that are neither supply of goods nor services.

4. Why These Changes?

• Technology readiness: Some provisions required GSTN portal upgrades before implementation.
• GST Council recommendations: These amendments follow recent GST Council meetings aimed at reducing tax evasion and easing disputes.
• Revenue protection: Stricter ITC rules and stronger penalty provisions are designed to curb fraudulent claims.

5. Impact on Businesses

✅ Positive

• Simpler return filing with improved auto-population.
• Faster disposal of appeals and clearer dispute resolution timelines.
• Better clarity on certain transactions under Schedule III.

⚠️ Challenges

• Tighter ITC deadlines may impact cash flows, especially for exporters and manufacturers.
• Higher penalties and risk of property attachment in cases of default.
• Businesses will need ERP/GST software updates by October 2025 to stay compliant.

6. Next Steps for Taxpayers

1. Study the changes – Review the relevant sections of the Finance Act, 2025.
2. Update GST systems – Ensure software is ready before October.
3. Train teams – Familiarize staff with new appeal and penalty rules.
4. Monitor GST portal – Watch for FAQs, circulars, and tutorials.
5. Seek expert advice – Consult GST professionals to assess business-specific impacts.

Conclusion

Notification No. 16/2025 – Central Tax is a significant step in India’s ongoing GST reforms. From 1st October 2025, businesses will face tighter ITC rules, faster appeal processes, and stronger compliance requirements. While these changes aim to improve efficiency and curb revenue leakage, taxpayers must act quickly to prepare their systems and processes.

NOTIFICATION No. 16/2025–Central Tax

Also Read: Recommendations of the 56th Meeting of the GST Council – CA Cult

CA Cult YouTube: Calculation of Income Tax FY 2024-25 | Old vs New Regime | For Salaried Employees

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