Indirect Tax Updates March 2025
Key GST Amendments Effective April 1, 2025
The Goods and Services Tax (GST) framework in India is set to undergo significant amendments to enhance compliance, streamline tax administration, and improve transparency in business transactions. Below are the major changes:
1. Tax Rate Changes
-
- Used Car Sales: GST rate increased from 12% to 18%, impacting the pre-owned car market.
- GST Rates on Restaurant Services
1. Stand-alone Restaurants (Not in Hotels)
| Aspect | Details |
|---|---|
| GST Rate | 5% |
| ITC (Input Tax Credit) | ❌ Not Available |
| When Food is Supplied via ECO (e.g., Swiggy/Zomato) | ECO is treated as the supplier under Section 9(5) of the GST Act |
2. Restaurants Inside Hotel Premise
A. Specified Premises
(Hotels with rooms priced above ₹7,500/day)
| Aspect | Details |
|---|---|
| GST Rate | 18% |
| ITC | ✅ Available |
| Impact of ECOs | Section 9(5) ❌ Not Applicable But ECO must collect TCS |
| Example | Restaurants in luxury hotels like Taj |
B. Non-Specified Premises
(Hotels with rooms priced below ₹7,500/day)
| Aspect | Details |
|---|---|
| GST Rate | 5% (default) |
| ITC | ❌ Not Available |
| Impact of ECOs | ECO is treated as supplier under Section 9(5) |
| Option to Upgrade | Can opt for 18% GST with ITC by filing Annexure VII |
| Example | Small hotels, lodges, guesthouses, etc. |
(As per GST Notification No. 05/2025)
- If a hotel’s room rate exceeded ₹7,500/day in the previous financial year, it will be considered a specified premise in the current year.
- Such hotels must:
- Charge 18% GST on restaurant services
- Allow Input Tax Credit
- Hotels below ₹7,500/day can opt in to be treated as specified premises by submitting a declaration.
- If they opt in: 18% GST + ITC
- If not: 5% GST without ITC
2. Compliance & ITC Adjustments
- Mandatory Input Service Distributor (ISD) Mechanism:
- Required for businesses distributing ITC on common expenses (e.g., rent, advertising, professional fees) across multiple GST registrations under the same PAN.
- ISD invoices must be issued, and GSTR-6 must be filed monthly (due by the 13th).
- Non-compliance will lead to ITC denial and penalties ranging from ₹10,000 to the amount availed incorrectly.
- Enhanced Credit Note Compliance:
- Recipients must accept/reject credit notes via the Integrated Management System (IMS) to prevent ITC mismatches and discrepancies.
3. Security & Authentication Enhancements
- Mandatory Multi-Factor Authentication (MFA) for all GST portal users to enhance security and prevent unauthorized access.
- Biometric Authentication for GST Registration:
- Applicants must complete biometric and photo verification at GST Suvidha Kendra (GSK) within 15 days.
- Failure to do so will result in delayed ARN (Application Reference Number) generation, postponing GST registration.
- Biometric Authentication for Directors (Effective March 1, 2025):
- Promoters and Directors of all companies (including private, public, foreign entities) must complete biometric authentication at any GSK within their home state.
4. E-Way Bill & E-Invoicing Adjustments
- E-Way Bill Restrictions (From Jan 1, 2025):
- Bills can only be generated for invoices issued within the last 180 days (extensions capped at 360 days).
- NIC will introduce new versions of E-Way Bills and E-Invoicing systems to enhance security.
- New Invoice Series & Turnover Calculation:
- Businesses must start using a new invoice series for FY 2025-26.
- Recalculation of aggregate turnover is required to assess GST registration, e-invoicing obligations, and QRMP scheme eligibility.
5. GST Waiver Scheme (SPL01 & SPL02)
- Businesses that clear all tax dues up to March 31, 2025, can apply for a waiver within three months, subject to eligibility criteria.
6. Sequential Filing for GSTR-7
- Taxpayers filing GSTR-7 (TDS under GST) must now follow a sequential order to improve reconciliation and streamline TDS collection.
Indirect Tax Update – Modifications and Explanations on the GST Relief Program
As per Notification No. 11/2025-Central Tax, issued on 27 March 2025, amendments have been made to Rules 164(4) and 164(7) of the Central Goods and Services Tax Rules, 2017 (CGST Rules), which outline the guidelines and conditions for resolving proceedings and applying for the Relief Program under Section 128A of the Central Goods and Services Tax Act, 2017 (CGST Act). The key changes are as follows:
Previously, if a tax notice, statement, or order covered both the Relief Program period (1 July 2017 – 31 March 2020) and a later period, the taxpayer could only apply for the program after settling the entire tax demand, including the subsequent period’s liabilities. Additionally, the taxpayer was responsible for any interest and penalties related to the post-Relief Program period.
Under the revised provision, businesses can now opt for the Relief Program exclusively for the eligible period while retaining the right to challenge tax demands for later periods before the Appellate Authority or the Goods and Services Tax Appellate Tribunal (GSTAT). Instead of withdrawing the appeal entirely, taxpayers must simply inform the Appellate Authority/GSTAT that they are only relinquishing the case for the Relief Program period. The authority will then issue an order specifically for the contested period(s). Any appeal will be considered withdrawn only for the Relief Program period, as per the taxpayer’s intimation.
Furthermore, any tax, interest, or penalties that were already paid for both the Relief Program period and subsequent periods before this amendment will not be refunded. Therefore, amounts settled before 26 March 2025 will not be eligible for reimbursement.
Additional Clarifications from CBIC on the Relief Program
- GST Paid via GSTR-3B Before November 1, 2024:
- Taxpayers who settled their GST dues through Form GSTR-3B before Section 128A of the CGST Act came into effect (i.e., before 1 November 2024) can still claim the program’s benefits, subject to approval by the relevant tax officer.
- However, from 1 November 2024 onwards, taxpayers seeking benefits under the Relief Program must pay GST through the prescribed methods under Rule 164 of the CGST Rules.
- Revised Process for Mixed-Period Notices:
- If a tax notice, statement, or order includes both the Relief Program period and later periods, taxpayers can now apply for relief after clearing dues only for the eligible period.
- As a result, the earlier clarification in Para 4 of Circular No. 238/32/2024-GST (issued on 15 October 2024) has been rescinded.
Related Services: GST Consultancy Services Tax Preparation Services