Union Budget 2025| Key Takeaways for GST and Customs

The Union Budget 2025 has introduced a few changes to the Goods and Services Tax (GST) Act and Customs Act, aiming to simplify compliance and address long-standing litigative issues faced by businesses and taxpayers. These changes reflect the government’s commitment to streamlining India’s indirect tax system while fostering economic growth. Below is an analysis of the key proposals and their potential implications:

1. Union Budget on Goods and Service Tax (GST)

1.1 Change the phrase “Plant or Machinery” to “Plant and Machinery”

Section 17(5) of the CGST Act specifies the list of items on which ITC is ineligible.
In such sub-section, the Phrase “Plant or Machinery” shall be replaced with “Plant and Machinery” to remove any ambiguity in interpretation for availment of an input tax credit.
Such amendment shall override the recent decision of Safari Retreat issued by the Supreme Court.

1.2 Output tax reversal on Credit Notes

Section 34(2) of the CGST Act has been amended to provide that Output Tax liability concerning Credit Notes shall be reduced only if the corresponding ITC is reversed by the recipient.
Such an amendment is made in line with the new functionality available on the GST portal which requires recipients to accept the ITC reversal made against the credit Note on the IMS dashboard.
If the recipient rejects the ITC reversal against the credit note then the supplier is not permitted to reduce the output tax liability concerning such credit note.

1.3 Pre-deposit for both Appellate Authority and Appellate Tribunal

As per Section 107(6) of the CGST Act, no appeal shall be filed against an order unless the appellant has paid:
- Full amount of tax, interest and penalty which is agreed by the appellant;
- 10% of the disputed tax amount subject to a maximum of INR 20 Crores

Union Budget has provided that to file an appeal against a penalty order, i.e., an order only consisting of penalty without involving demand of any tax, the appellant is required to pre-deposit 10% of such penalty amount.

Similarly, for filing an appeal to the Appellate Tribunal against a penalty order, a pre-deposit is required to be made of 10% of the penalty amount (in addition to a pre-deposit paid before the first appellate authority).

1.4 Track and trace mechanism for certain goods

A new section 148A has been proposed to be inserted which provides for track and trace of certain classes of goods and persons, who have specified goods.

Concerning specified goods, the government may provide a system for enabling the affixation of unique identification marking and for electronic storage and access of information contained therein.

“unique identification marking” includes a digital stamp, digital mark, or any other similar marking, that is unique, secure, and non-removable;

The specified persons shall:
- affix a unique identification marking on such goods or packages containing specified information;
- furnish specified information and details within a specified time;
- furnish details of the machinery installed in the place of business of manufacture of such goods, including the identification, capacity, duration of operation, and other information;

In case of contravention of Section 148A, a penalty shall be imposed of INR 1 Lakh or 10% of the tax payable on such goods, whichever is higher. Such penalty shall be imposed in addition to the penalty specified under Chapter XV.

1.5 Other Amendments:

The Union budget has proposed the following other amendments:

Input Service Distributors (ISD) provided are amended to explicitly include provisions for the distribution of ITC for inter-state supplies on which tax is payable under RCM. Such amendment shall be made effective from 1 April 2025.

Considering the clarification that no GST is payable on vouchers, the provisions for the time of supply of vouchers given under Section 12(4) and Section 13(4) of the CGST Act are omitted.

2. Union Budget on Customs

2.1 Voluntary revision on an assessment basis allowed post-clearance

A new section 18A is proposed to be inserted under the Customs Act which provides as follows:
- An exporter or importer is allowed to revise an entry already made after the clearance of goods.
- On revision, the importer or exporter shall self-assess the duty.
- Where the revised entry and self-assessment results in:
  - Short payment then the exporter or importer shall make the voluntary payment of such differential amount along with interest;
  - Excess payment then such revised entry shall be deemed to be a claim for refund

The proper officer shall verify the revised entry and self-assessment on selected cases and shall re-assess the duty leviable on such goods if self-assessment is not done correctly.

However, no revision post clearance shall be allowed where:
- Any audit under Chapter XIIA or search, seizure, or summons under Chapter XIII has been initiated and intimated to the importer or the exporter concerned;
- cases requiring a refund where the proper officer has reassessed the duty
- Any other specified cases

2.2 Time limit for provisions assessment

The Union budget has specified that the timeline for finalization of provisional assessments is 2 years. Such a period may further extended by one year by the principal commissioner on sufficient cause being shown.

2.3 Other amendments:

With effect from 1st April 2025, powers of the Settlement Commission shall be exercised by the Interim Board and the provisions of this Act shall apply to the Interim Board as they apply to the Settlement Commission. Pending applications shall be cleared by an Interim Board to be constituted.

The time limit is extended for the end use of goods imported at a concessional rate of duty from 6 months to 1 year. Further, IGCR returns are to be filed quarterly instead of monthly.

Apart, the Union budget has proposed to amend Custom rates on various goods such as BCD on Interactive Flat Panel Displays (Completely Built Units) has been increased from 10% to 20%. On the contrary, BCD on various footwear is reduced from 35% to 20%.

Conclusion:

The Union Budget has not made major amendments under the Customs Act and Goods and Service Tax. However, suggested amendments aim to provide relaxation to the taxpayers in compliance, reduce litigations, and place reliance on the taxpayers in self-assessment of tax liability.