Clause-by-Clause Analysis of the Income Tax Bill, 2025

The Income Tax Bill, 2025 proposes a significant revamp of India's tax system by streamlining definitions, modernizing provisions, and aligning tax laws with the digital economy. Below is a detailed breakdown of each key clause.

1. General Provisions (Clauses 1-3)

Clause 1 – Short title, extent, and commencement.
Clause 2 – Defines various terms used in the legislation.
Clause 3 – Introduces the term "Tax Year", aligning it with the financial year.

 Key Change: Standardizes terminology for consistency.

2. Charge of Income Tax (Clauses 4-6)

Clause 4 – Specifies the charge of income tax for individuals and entities.
Clause 5 – Defines scope of total income for residents and non-residents.
Clause 6 – Defines residential status rules, with additional conditions for complex cases (e.g., multiple citizenships).

 Key Change: Simplifies taxability rules for different residency statuses.

3. Income Classification & Exemptions (Clauses 7-14)

Clause 7 – Covers income deemed to be received, such as employer contributions.
Clause 8 – Taxability of capital assets received by specified persons.
Clause 9 – Defines deemed income from business connections and sources like royalties, fees, dividends.
Clause 10 – Portuguese Civil Code: Income apportionment rules for Goa.
Clause 11 – Defines incomes not included in total taxable income.
Clause 12 – Exempts political parties & electoral trusts from taxation.
Clause 13 – Defines different heads of income.
Clause 14 – Disallows certain expenditures related to exempt incomes.

Key Change: Provides clarity on exemptions, deductions, and taxable categories.

4. Income from Salaries (Clauses 15-19)

 Clause 15 – Defines salary income, including arrears.
 Clause 16 – Taxability of wages, annuities, pensions, gratuities, perquisites.
 Clause 17 – Excludes certain benefits from taxable perquisites (e.g., work-related digital assets).
 Clause 18 – Defines "profits in lieu of salary", including compensations.
 Clause 19 – Allows salary deductions, including ₹75,000 standard deduction.

Key Change: Modernized to include digital compensations & increase deductions.

5. Income from House Property (Clauses 20-25)

 Clause 20 – Defines taxable house property income.
 Clause 21 – Method for computing annual value of a property.
 Clause 22 – Deductions for municipal taxes, loan interest (₹2 lakh cap remains).
 Clause 23 – Taxation of arrears/unrealized rent.
 Clause 24 – Co-owners taxed separately.

Key Change: Retains most existing provisions with simplified computation rules.

6. Income from Business & Profession (Clauses 26-66)

 Clause 26 – Defines business profits.
 Clause 27 – Rules for computing business income.
 Clause 28-29 – Deductions for rent, insurance, employee welfare.
 Clauses 30-32 – Covers bad debts, depreciation, capital expenses.
 Clause 33 – Defines tangible & intangible assets for depreciation.
 Clause 34-36 – Non-allowable deductions for tax evasion prevention.
 Clause 37-42 – Foreign exchange fluctuations, depreciation rules.
 Clause 43-46 – Scientific research & skill development deductions.
 Clause 47-50 – Agriculture & mineral exploration incentives.
 Clause 58 – Presumptive taxation for small businesses.
 Clause 59-65 – Non-resident taxation, digital business rules.

Key Change: Recognizes digital transactions, improves startup incentives.

7. Capital Gains Tax (Clauses 67-91)

 Clause 67 – Defines capital gains taxation.
 Clause 68-70 – Rules for share buybacks & liquidations.
 Clause 72-75 – Holding period changes for different assets.
 Clause 76-77 – New taxation rules for digital assets & market-linked debentures.
 Clause 83-86 – Exemptions for agricultural land, SEZ investments.
 Clause 91 – Fair market valuation for taxation.

Key Change: Includes crypto & digital asset taxation, updates reinvestment rules.

8. Income from Other Sources (Clauses 92-105)

 Clause 92 – Chargeability of non-classified income (dividends, lotteries, online gaming).
 Clause 93-94 – Allowable deductions & disallowed expenses.
 Clause 95-96 – Clubbing income to prevent tax avoidance.

Key Change: Includes e-sports, digital earnings, cryptocurrency winnings.

9. Anti-Tax Avoidance Measures (Clauses 178-184)

Clause 178-179 – General Anti-Avoidance Rule (GAAR) expansion.
 Clause 180-181 – Defines impermissible transactions.
 Clause 182-184 – Covers tax treaty abuse, shell companies.

Key Change: Stronger measures against tax evasion.

10. Administrative & Compliance Reforms (Clauses 263-389)

          Clause 263-267 – E-filing & faceless assessments.
          Clause 268-273 – Scrutiny, dispute resolution improvements.
          Clause 274-289 – Time limits for audits, reassessments.

Key Change: Automates assessments, reduces manual intervention.

 

11. Penalties & Prosecutions (Clauses 439-498)

 Clause 439-449 – Under-reporting penalties.
          Clause 450-465 – Penalties for false statements, non-filing.
          Clause 475-486 – Prosecution for tax evasion, fake accounts.

Key Change: Strengthens penalties for digital & corporate tax frauds.

Conclusion: Key Takeaways from the Income Tax Bill, 2025

Modernization – Includes digital assets, online businesses, & cryptocurrency taxation.
Simplification – Clearer definitions, deductions, & compliance rules.
Anti-evasion Strengthening – GAAR, digital tax audits, & enhanced scrutiny.
Automation – Faceless assessments, AI-driven processing, and e-filing mandates.

What’s next?

These changes will impact individuals, startups, digital businesses, & NRIs. Understanding the reforms will help optimize tax planning & compliance.

 

A Comprehensive Comparison of the Income Tax Bill, 2025 and the Income Tax Act, 1961

Introduction

India’s tax system is undergoing a significant transformation with the introduction of the Income Tax Bill, 2025. The bill aims to simplify tax laws, incorporate modern economic developments, and make tax compliance easier for individuals and businesses. This article provides a detailed comparison of the new provisions with the existing Income Tax Act, 1961, highlighting key changes, their rationale, and their impact on taxpayers.

 

1. Basis of Charge

Income Tax Act, 1961 (Section 4): Income tax is charged for a financial year at rates specified in the Finance Act.
Income Tax Bill, 2025 (Clause 4): Introduces the term "tax year", which aligns with the financial year but simplifies terminology.

Key Change:

Uniform terminology – Ensures consistency and clarity in tax computation.

2. Definition of Key Terms

The Income Tax Bill, 2025 introduces new definitions to align with technological and economic advancements:

Income Tax Act, 1961: Defined terms like "assessee," "assessment year," and "previous year" but lacked provisions for digital transactions.

Income Tax Bill, 2025:
Virtual Digital Asset (VDA) – Includes cryptocurrencies, NFTs, and other digital assets.
Electronic Mode – Recognizes digital payments, e-wallets, and online transactions.
Tax Year – Standardizes terminology for ease of understanding.

Impact:

Makes taxation more comprehensive by including digital transactions.
Reduces ambiguity in defining taxable income sources.

3. Scope of Total Income

Income Tax Act, 1961 (Sections 5 & 9): Residents are taxed on global income, while non-residents are taxed only on income accrued in India.
Income Tax Bill, 2025 (Clauses 5 & 9): Maintains similar rules but explicitly defines deemed income (e.g., payments to specified persons and accrual sources).

Key Change:

More clarity for non-residents and cross-border transactions.
Better-defined scope for taxation of foreign incomes.

4. Residence Criteria

Income Tax Act, 1961 (Section 6): A person is a tax resident if they stay in India for at least 182 days in a financial year (or 60 days in specific cases).
Income Tax Bill, 2025 (Clause 6):
Retains similar residency rules but adds special provisions for complex cases (e.g., individuals with multiple citizenships, business travelers).

Impact:

Addresses tax residency issues for global Indians and NRIs.
Reduces confusion regarding dual residency status.

5. Heads of Income & Taxation

The five existing heads of income remain, but with key enhancements:

Category	Income Tax Act, 1961	Income Tax Bill, 2025	Key Change
Salaries	Includes wages, annuities, commissions, perquisites	Similar structure, but excludes work-related digital assets from taxable perquisites	Exempts work-use laptops, software
House Property	Annual value of property taxed	Retains similar rules but defines digital rent payments	Recognizes digital transactions
Business/Profession	Covers business profits, deductions	Retains structure but modernizes digital business taxation	New incentives for startups, digital enterprises
Capital Gains	Taxes gains from asset sales	Expands scope to include cryptocurrencies, NFTs	New rules for digital assets
Other Sources	Covers lotteries, dividends, etc.	Retains scope but clarifies winnings from online gaming	Tax on e-sports winnings

6. Deductions & Exemptions

Income Tax Act, 1961: Includes deductions under Sections 80C to 80U, covering investments, donations, education expenses, and more.
Income Tax Bill, 2025: Consolidates deductions and introduces new exemptions, such as:
Startup incentives – 100% tax exemption for three consecutive years within the first 10 years.
Renewable energy incentives – Tax benefits for solar, wind, and green energy investments.
Digital economy deductions – Incentives for IT infrastructure & e-commerce businesses.

Impact:

Boosts entrepreneurship & innovation.
Encourages sustainable investments.

7. Capital Gains Taxation

Income Tax Act, 1961 (Sections 45-55A): Classifies gains as short-term or long-term based on holding periods.
Income Tax Bill, 2025 (Clauses 67-91):
Retains categorization but adds specific rules for virtual digital assets.
Adjusts holding periods for certain asset classes.
Clarifies reinvestment exemptions.

Impact:

Eliminates ambiguity in digital asset taxation.
Aligns taxation with modern investment practices.

8. Administrative & Compliance Reforms

Income Tax Act, 1961 (Sections 139-158): Covers tax audits, return filing, and assessments.
Income Tax Bill, 2025 (Clauses 263-389):
Faceless Assessments – Fully automated, AI-driven scrutiny process.
Mandatory E-filing – No paper-based submissions.
Reduced human intervention in tax assessments.

Impact:

Speeds up processing & reduces manual errors.
Enhances transparency & minimizes corruption.

9. Anti-Tax Avoidance Measures

Income Tax Act, 1961 (Sections 95-102): Contains General Anti-Avoidance Rules (GAAR).
Income Tax Bill, 2025 (Clauses 178-184):
Expands GAAR to cover digital transactions.
Introduces stricter rules for impermissible arrangements.

Impact:

Closes loopholes used for tax evasion.
Prevents artificial income shifting.

10. Impact on Non-Profit Organizations

Income Tax Act, 1961 (Sections 11-13): Provides tax exemptions for charities.
Income Tax Bill, 2025 (Clauses 332-355):
Defines stricter compliance measures for NGOs.
Prevents misuse of tax-exempt status for commercial activities.

Impact:

Ensures genuine charitable work benefits.
Reduces tax evasion through non-profits.

Conclusion

The Income Tax Bill, 2025 modernizes India’s tax framework, making it more efficient, transparent, and business-friendly. Key improvements include:
Inclusion of digital transactions & virtual assets.
Simplified tax administration & compliance.
Stronger anti-avoidance rules & enhanced transparency.

Stay Informed! These changes will impact individuals, businesses, and investors. Adapting to the new provisions will help optimize tax benefits and ensure compliance.

What are your thoughts on the new tax bill? Let us know in the comments!

 

The Commissioner, on the recommendations of the Council, hereby extends the time limit for furnishing the return in FORM GSTR-3B electronically, through the common portal, by the registered persons, as specified under-

1. Monthly Returns (December 2024):

• For registered persons filing under sub-section (1) of Section 39, the due date for December 2024 has been extended to:
  22nd January 2025

2. Quarterly Returns (October to December 2024):

• For registered persons filing under the proviso to sub-section (1) of Section 39, the extended due dates are as follows:

Region	States/UTs	Extended Due Date
Region 1	Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, Daman & Diu, Dadra & Nagar Haveli, Puducherry, Andaman & Nicobar Islands, Lakshadweep	22nd January 2025
Region 2	Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand, Odisha, Jammu & Kashmir, Ladakh, Chandigarh, Delhi	26th January 2025

 

1. Mandatory Reporting of HSN Codes:

• As per Notification No. 78/2020 – Central Tax (15th Oct 2020), taxpayers must report HSN codes in Table-12 of GSTR-1/1A based on their Aggregate Annual Turnover (AATO) in the preceding financial year.
• Implementation is phase-wise.

Phase 2: Effective from 01st Nov 2022

1. Taxpayers with AATO > ₹5 Cr:
• Mandatory to report 6-digit HSN codes for goods and services.
• Manual entry allowed, but warnings are shown for incorrect HSN codes.
• Filing is permitted after manual entry.
2. Taxpayers with AATO ≤ ₹5 Cr:
• Mandatory to report 4-digit HSN codes for goods and services.
• Manual entry allowed, with warnings for incorrect HSN codes.
• Filing is permitted after manual entry.

Phase 3: Effective from January 2025 (New Changes)

Taxpayers with AATO > ₹5 Cr:

• Mandatory 6-digit HSN codes for goods and services.
• Manual entry NOT allowed; HSN codes must be selected from a dropdown.
• A new field, “Description as per HSN Code,” will auto-populate from the HSN master.

Taxpayers with AATO ≤ ₹5 Cr:

• Mandatory 4-digit HSN codes for goods and services.
• Manual entry allowed, with warnings for incorrect HSN codes.

Table-12 Validation for Supply Values:

• New Validations Introduced:
1. B2B supply values in Table-12 are cross-validated with values in tables 4A, 4B, 6B, 6C, 8, 9A, 9B, 9C, 15, 15A.
2. B2C supply values in Table-12 are validated against values in tables 5A, 6A, 7A, 7B, 8, 9A, 9B, 9C, 10, 15, 15A.
3. For amendments, only differential values are validated.
• Initial Warning Mode:

• Alerts will be shown for mismatches, but filing is allowed.
• Note: B2B tab in Table-12 cannot be left blank if B2B supplies are reported elsewhere in GSTR-1.

Additional Enhancements in Table-12 of GSTR-1/1A:

1. New Tabs:
• Table-12 is now bifurcated into two tabs: “B2B Supplies” and “B2C Supplies”.
• Taxpayers need to enter HSN summary details separately under each tab.
2. Download HSN Codes List
• A new button, “Download HSN Codes List,” allows taxpayers to download an Excel file containing updated HSN & SAC codes along with their descriptions.
3. Searchable Product Names in My Master:
• The button “Product Name as in My Master” is now searchable.
• Upon selecting a product description from My HSN Master, the HSN code, description, UQC, and quantity will auto-populate.
• This functionality is optional.

Phase 4:

• Details will be communicated in due course.

Vouchers have been a focal point of discussion in the trade and industry, raising critical questions about their GST implications. Common concerns include whether transactions in vouchers qualify as a supply of goods or services, the GST applicability on voucher trading by distributors, and the taxation of unredeemed vouchers (breakage). Diverging views among field formations have led to ambiguity and litigation, necessitating a detailed clarification from the Board under Section 168(1) of the CGST Act, 2017.

Key Issues and Clarifications

1. Are Transactions in Vouchers a Supply of Goods or Services?

Under the CGST Act, vouchers are defined as instruments creating an obligation to accept them as consideration for goods or services. They may also qualify as pre-paid instruments regulated by the RBI. Based on legal provisions:

• When Vouchers Are Pre-Paid Instruments Recognized by RBI:
  These are considered "money," which is excluded from the definitions of goods and services. Hence, transactions involving such vouchers are neither a supply of goods nor services and are not taxable under GST.
• When Vouchers Are Not Recognized as Money:
  In such cases, vouchers represent actionable claims. Per Schedule III of the CGST Act, actionable claims (excluding specified actionable claims like betting or gambling) are not treated as a supply of goods or services. Thus, these transactions are also not taxable.

However, the underlying supply of goods or services redeemed through vouchers remains taxable.

2. GST Treatment for Voucher Distribution Models

a. Principal-to-Principal (P2P) Model:

Distributors purchase vouchers from issuers at a discount and sell them, earning a trading margin. Since transactions in vouchers do not qualify as goods or services, trading them is not taxable under GST.

b. Commission-Based Model:

Here, distributors act as agents, earning commissions for marketing and distributing vouchers. GST is applicable on the commission earned as it constitutes a supply of services.

3. GST on Additional Services

Services like advertising, co-branding, marketing, and customer support provided by distributors or other service providers to voucher issuers are taxable under GST. The applicable rate depends on the nature of the services rendered.

Conclusion

The clarifications provided aim to resolve ambiguities and ensure uniformity in GST implementation. While vouchers as instruments are not directly taxable, the supply of goods/services they represent, and additional services rendered in connection with their distribution, attract GST.

For businesses dealing with vouchers, understanding these nuances is essential to ensure compliance and avoid litigation. Stay informed to leverage these clarifications effectively.

 

The Goods and Services Tax (GST) framework in India has introduced specific provisions for determining the place of supply for online services, especially for services provided to unregistered recipients. This blog post aims to clarify the compliance requirements for suppliers of online services, ensuring accuracy in recording the place of supply on invoices.

Background

References from field formations indicate instances of non-compliance in recording the correct place of supply by suppliers of online services. Misinterpretation of Section 12(2)(b) of the Integrated Goods and Services Tax Act, 2017 (IGST Act), along with Rule 46 of the Central Goods and Services Tax Rules, 2017 (CGST Rules), has led to discrepancies.

Instead of declaring the recipient's state as the place of supply as mandated, some suppliers incorrectly declare their own location. This practice results in revenue being allocated to the wrong state, warranting clarification to standardize the implementation of these provisions.

Key Legislative Provisions

1. Online Information and Database Access or Retrieval (OIDAR) Services:
   Defined under Section 2(17) of the IGST Act, these are services delivered electronically, such as cloud services, digital content subscriptions, and online gaming.
2. Place of Supply (Section 12(2) of IGST Act):
• For registered recipients, the place of supply is their location.
• For unregistered recipients:
• The location of the recipient, if an address is available on record.
• Otherwise, the supplier's location.
3. Invoice Requirements (Rule 46 of CGST Rules):
• Tax invoices must include the recipient's state and address.
• For supplies involving online services or through electronic commerce operators, recording the recipient's state is mandatory, irrespective of the supply's value.

Clarifications Issued

1. Mandatory Declaration of Recipient's State:
   Suppliers of online services, including those via electronic commerce operators, must record the recipient's state on invoices. This applies regardless of the supply value.
2. Applicability to All Online Services:
   Services such as OTT subscriptions, e-magazines, telecom services, and other digital offerings are included.
3. Mechanism for Address Collection:
   Suppliers must develop systems to gather the recipient's state information before providing services.
4. Correct Place of Supply Reporting:
• The recorded state is deemed the address on record.
• Suppliers must declare the recipient's location as the place of supply in GSTR-1/1A filings.
5. Penalties for Non-Compliance:
   Failing to comply with these provisions, including not recording mandatory details on invoices, may lead to penal action under Section 122(3)(e) of the CGST Act.

 

Key Takeaways

• Suppliers of online services must ensure compliance with GST provisions by accurately recording the recipient's state on invoices.
• Non-compliance not only disrupts revenue allocation but also attracts penalties.
• A robust mechanism to capture recipient details can help suppliers align with the law and avoid unnecessary complications.

This clarification underscores the importance of understanding and adhering to GST regulations, fostering consistency across the implementation of the law.

For further guidance, suppliers are advised to consult relevant GST experts

 

Introduction
The Central Board of Indirect Taxes and Customs (CBIC) has issued a clarification regarding the availability of Input Tax Credit (ITC) under clause (b) of sub-section (2) of section 16 of the Central Goods and Services Tax Act, 2017 (CGST Act). This clarification specifically addresses situations where goods are delivered by a supplier at their place of business under an Ex-Works (EXW) contract. The matter has been a point of concern, particularly in the automobile sector.

Background
In the automobile sector, the relationship between Original Equipment Manufacturers (OEMs) and dealers is commonly governed by EXW contracts. Under these contracts:

• The property in goods (e.g., vehicles) is transferred to the dealer at the factory gate of the OEM.
• Goods are handed over to a transporter arranged by the OEM on behalf of the dealer.
• Insurance, if arranged, is done in the dealer’s name, and any claims must be lodged by the dealer.

The dealers typically account for the goods and avail ITC based on invoices raised when the goods are handed over to the transporter at the factory gate. However, some field formations have challenged this practice, contending that ITC can only be availed once the goods physically reach the dealer’s business premises. Show cause notices have been issued, leading to confusion among dealers.

 

Legal Framework
Clause (b) of sub-section (2) of section 16 of the CGST Act states that a registered person can claim ITC only if they have “received” the goods or services. The explanation to this clause further clarifies that the receipt of goods includes scenarios where:

1. Goods are delivered by the supplier to a recipient or another person on the registered person’s direction, either before or during the movement of goods.
2. Delivery may occur through the transfer of documents of title or otherwise.

 

Key Clarifications

1. Receipt of Goods
   The provision does not mandate physical receipt of goods at a specific location. Unlike the erstwhile Central Excise regime, where CENVAT credit required physical receipt at the factory, the CGST Act provides for deemed receipt under certain conditions.
2. Deemed Receipt Under EXW Contracts
   In EXW contracts, goods are deemed to have been received when:

• The supplier hands over the goods to the transporter at their factory gate.
• The property in the goods passes to the dealer at this point.
• Transport and insurance, if arranged, are done on behalf of the dealer.

3. Applicability Beyond the Automobile Sector
   The same principles apply to other industries where goods are delivered under EXW contracts. The registered recipient is considered to have “received” the goods at the supplier’s premises upon handing over to the transporter.

Conditions for Availing ITC

1. Use in Business
   ITC can only be claimed if the goods are used or intended to be used in the course of business.
2. Non-Business Diversion
   If the goods are diverted for non-business purposes or lost, stolen, or destroyed, ITC will not be available.
3. Compliance with Other Provisions
   Other conditions under sections 16 and 17 of the CGST Act must also be fulfilled.

Conclusion
This clarification brings much-needed uniformity and clarity to the interpretation of ITC eligibility under EXW contracts. Dealers in the automobile sector and other industries can now proceed with confidence, provided they adhere to the specified conditions. This move is expected to streamline operations and reduce unnecessary litigation.

For more updates and detailed insights into GST compliance, stay tuned to our blog.

 

In the realm of GST compliance, questions often arise concerning the input tax credit (ITC) obligations of electronic commerce operators (ECOs), particularly for services covered under Section 9(5) of the Central Goods and Services Tax Act, 2017 (CGST Act). To provide clarity, the Central Board of Indirect Taxes and Customs (CBIC) has issued updated guidelines, referencing Circular No. 167/23/2021 – GST dated 17.12.2021.

Understanding the Context
ECOs, under Section 9(5) of the CGST Act, are obligated to pay tax as if they are the suppliers of certain notified services (e.g., restaurant services). A common query has been whether ECOs must proportionately reverse ITC on inputs and input services used for such supplies.

Key Clarifications Provided

1. Dual Role of ECOs:
• ECOs supply services notified under Section 9(5) (e.g., restaurant services) for which they are liable to pay tax.
• They also provide their own services, such as charging platform fees or commissions, for which they utilize inputs and input services.
2. ITC Reversal Not Required:
• As per Circular No. 167/23/2021, ECOs do not need to reverse ITC for restaurant services supplied through their platform.
• The same principle applies to other services under Section 9(5). ECOs are not required to reverse ITC under Sections 17(1) or 17(2) of the CGST Act for these supplies.
3. Tax Liability Payment:
• Tax liability under Section 9(5) must be discharged in full via the electronic cash ledger.
• ITC on inputs and input services related to such supplies cannot be utilized for this purpose but can be used for discharging tax liabilities for the ECO’s own services.

This clarification ensures uniformity in implementation and simplifies compliance for ECOs. By delineating the use of ITC and specifying payment methods for Section 9(5) liabilities, it provides a structured approach to managing tax obligations while safeguarding the ITC on other services.

ECOs are encouraged to review the circular in detail and ensure adherence to these guidelines for seamless compliance and efficient ITC utilization.

 

The 55th GST Council meeting, chaired by Union Finance Minister Smt. Nirmala Sitharaman, was held in Jaisalmer, Rajasthan, with participation from state and UT Finance Ministers, Chief Ministers, and senior officials. The Council discussed significant changes to GST tax rates, trade facilitation measures, and compliance streamlining. Below are the key recommendations and decisions:

I. Changes in GST Rates

Goods

1. Fortified Rice Kernel (FRK): GST reduced to 5%.
2. Gene Therapy: Exempted from GST.
3. LRSAM Systems: IGST exemption extended to systems and parts meant for assembly/manufacture under Notification 19/2019-Customs.
4. Merchant Exporters: Compensation Cess rate reduced to 0.1% for supplies.
5. IAEA Equipment Imports: Exempted from IGST for specified conditions.
6. Food Preparations for Free Distribution: Concessional GST rate of 5% extended for inputs supplied under government programs.

Services

1. Sponsorship Services: Now under the Forward Charge Mechanism.
2. Motor Vehicle Accident Fund Contributions: Exempted from GST.
3. Hotel Services: GST rate on restaurant services linked to the value of accommodation units in preceding financial years, effective from 01.04.2025.
4. Renting by Unregistered Persons: Exclusion of composition levy taxpayers from reverse charge mechanism introduced under Notification No. 09/2024-CTR.

Other Clarifications on Goods and Services

1. Used Vehicles: GST increased to 18% on certain high-capacity vehicles with tax applied on margin value.
2. Autoclaved Aerated Concrete (ACC) Blocks: GST clarified at 12% for blocks with over 50% fly ash.
3. Agricultural Supplies: No GST on fresh/dried pepper and raisins supplied by agriculturists.
4. Pre-Packaged Commodities: Definition expanded to include retail-sale packages under 25 kg/litres.
5. Popcorn: GST clarified based on preparation—5% (non-prepackaged), 12% (prepackaged), and 18% (sugar confectionery).
6. Payment Aggregators: RBI-regulated aggregators exempted under Notification No. 12/2017-CT(R).
7. Penal Charges: No GST on penalties levied by banks/NBFCs for loan term non-compliance.

II. Measures for Trade Facilitation

1. Schedule III Amendment:
• Goods warehoused in SEZ/FTWZ for exports or Domestic Tariff Area clearance are neither supply of goods nor services, effective 01.07.2017.
2. Vouchers Taxability:
• Transactions in vouchers not treated as supply of goods/services.
• Principal-to-agent distributions remain taxable.
• No GST on unredeemed vouchers (breakage).
3. Circulars for Clarity:
• No ITC reversal for supplies under Section 9(5).
• ITC allowed for goods delivered at supplier’s premises under ex-works contracts.
• Late fee waivers for FORM GSTR-9C delays from 2017-18 to 2022-23, if filed by 31st March 2025.

III. Streamlining Compliance in GST

1. Filing Simplification:
• Proposals for easier compliance with GSTR filing.
• Reduction in disputes through detailed clarifications.
2. ITC Enhancements:
• Streamlined provisions for claiming ITC, addressing ambiguities.
3. Alignment with International Standards:
• Recommendations to align warehousing and voucher taxation with global best practices.

Conclusion

The 55th GST Council meeting introduced impactful changes, emphasizing trade facilitation, clarity in tax provisions, and streamlined compliance. The revised rates and exemptions aim to reduce ambiguities and enhance GST implementation efficiency, supporting businesses and taxpayers alike. Stakeholders are encouraged to stay updated and align with the new regulations for a seamless transition.

In light of Notification No. 12/2024 - Central Tax dated 10th July 2024, read with Notification No. 20/2024 - Central Tax dated 8th October 2024, changes in reporting for Form GSTR-9 have been introduced for FY 2023-24 onwards. The total input tax credit (ITC) available for inward supplies is now auto-populated in Table 8A of GSTR-9 based on GSTR-2B for the respective financial year.

Meanwhile, Table 8C of GSTR-9 requires manual entry of ITC on inward supplies received during the FY but availed in the next FY within the permissible period. This change has raised several queries regarding mismatches between the values in Table 8A and Table 8C, particularly due to differences in data sources (GSTR-2A for FY 2022-23 and GSTR-2B for FY 2023-24). Below are common issues and recommended solutions to ensure compliance and accurate reporting:

Common Scenarios and Reporting Guidelines

1. Invoice Dated FY 2023-24, Reported Late in GSTR-1

Issue: The supplier files GSTR-1 post-March 2024, making the invoice part of the next year’s GSTR-2B.
Solution:

• Report this ITC in Table 8C and Table 13 of GSTR-9 for FY 2023-24, as it pertains to the current FY.
• Align reporting with the instructions for Table 8C and Table 13 of Form GSTR-9.

 

2. ITC Claimed and Reversed in FY 2023-24, Reclaimed in FY 2024-25

Issue: ITC is reversed due to non-payment to the supplier within 180 days (as per Section 16(2)) but reclaimed after payment in FY 2024-25.
Solution:

• Report the reclaimed ITC in Table 6H of GSTR-9 for FY 2024-25.
• Do not include this in Table 8C or Table 13 of GSTR-9 for FY 2023-24.
• This approach applies to reclaims under Rule 37A as well.

 

3. ITC Claimed, Reversed, and Reclaimed Due to Goods Received Late

Issue: ITC claimed in FY 2023-24 and reversed due to non-receipt of goods (as per Circular 170), then reclaimed in FY 2024-25.
Solution:

• Report reclaimed ITC in Table 8C and Table 13 of GSTR-9 for FY 2023-24.

 

4. FY 2022-23 Invoice in Table 8A of FY 2023-24

Issue: Supplier files GSTR-1 late, causing FY 2022-23 invoices to appear in Table 8A of FY 2023-24.
Solution:

• Exclude these values from Table 8C and Table 13 of GSTR-9 for FY 2023-24.
• Report only current FY data in Tables 4, 5, 6, and 7, per Instruction 2A of the notified form.

5. ITC Claimed, Reversed, and Reclaimed in the Same FY

Issue: Invoice ITC is claimed, reversed, and reclaimed within FY 2023-24.
Solution:

• Declare this ITC in Table 6H of GSTR-9.
• Do not duplicate reporting under Table 7 or elsewhere, as clarified by the CBIC press release dated 3rd July 2019.

 

Key Takeaways

• Understand the source differences (GSTR-2A vs. GSTR-2B) and how they impact auto-population.
• Ensure that only current FY transactions are reported in relevant tables.
• Reclaimed ITC should be correctly reported based on timing and instructions for specific tables.

By adhering to these guidelines, taxpayers can minimize mismatches and ensure accurate compliance with the revised norms for FY 2023-24 annual returns.