The Finance Act 2025 been notified on 29th March 2025. The Finance Act sections 121 to 134 (Page 45 to 48) amends Central Goods and Service Tax, sections 92 to 103 (Page 39 to 43) amends Custom Duty, sections 104 to 120 (Page 43 to 45) amends Central Excise and section 135 (Page 48 to 49) amends Service Tax. The key amendments are summarised as follows:
Central Goods and Service Tax (CGST)
Distribution of input tax credit by the Input Service Distributor in respect of inter-state supplies: CGST Section 2(61) has been amended to explicitly provide for distribution of input tax credit by the Input Service Distributor in respect of inter-state supplies on which tax has to be paid on reverse charge basis, by inserting references of IGST Act. Similar references have been inserted in sections 20(1) and 20(2) of CGST Act.
Definitions of the terms ‘Local Fund’ and ‘Municipal Fund’ used in the definition of ‘local authority’: Section 2(69)(c) has been amended to replace “municipal or local fund” with “municipal fund or local fund” and inserted an Explanation, to provide for definitions of the terms ‘Local Fund’ and ‘Municipal Fund’ used in the definition of “local authority” so as to clarify the scope of the said terms.
Implementation of Track and Trace Mechanism: Section 2(116A) has been inserted to provide definition of Unique Identification Marking for implementation of Track and Trace Mechanism. New section 148A has been inserted to provide for an enabling mechanism for Track and Trace Mechanism for specified commodities. New section 122B has been inserted to provide penalty for contraventions of provisions related to the Track and Trace Mechanism provided under section 148A.
Deletion of provisions relating to time of supply of Vouchers: Section 12(4) and section 13(4) relating to time of supply in respect of Vouchers has been deleted. Section 12 of CGST relates to time of supply of goods.
Substitution of words with ‘plant and machinery’: Section 17(5)(d) has been amended to substitute the words “plant or machinery” with words “plant and machinery”. This amendment will be effective retrospectively from 1st July 2017, notwithstanding anything to the contrary contained in any judgment, decree or order of any court or any other authority. Section 17 of CGST relates to apportionment of credit and blocked credits.
Input tax credit reversal in respect of a credit-note: Proviso to Section 34(2) has been amended to explicitly provide for requirement of reversal of corresponding input tax credit in respect of a credit-note, if availed, by the registered recipient, for the purpose of reduction of tax liability of the supplier in respect of the said credit note. Section 34 of CGST relates to credit and debit notes.
Statement of input tax credit: Section 38(1) has been amended to omit the expression “auto generated” with respect to statement of input tax credit in the said sub- section. Section 38(2) has been amended by omitting the expression “auto generated” with respect to statement of input tax credit in said sub- section and also to insert the expression “including” after the words “by the recipient” in clause (b) of said sub-section to make the said clause more inclusive. Section 38(2) has been amended by inserting a new clause (c) in the said sub-section to provide for an enabling clause to prescribe other details to be made available in statement of input tax credit. Section 38 of CGST relates to furnishing details of inward supplies.
Filing of return: Section 39(1) has been amended so as to provide for an enabling clause to prescribe conditions and restriction for filing of return under the said sub-section. Section 39 of CGST relates to furnishing of returns.
Mandatory 10% pre- deposit of penalty in cases involving only demand of penalty: Section 107(6) has been amended to provide for 10% mandatory pre- deposit of penalty amount for appeals before Appellate Authority in cases involving only demand of penalty without any demand for tax. Section 112(8) has been amended to provide for 10% mandatory pre- deposit of penalty amount for appeals before Appellate Tribunal in cases involving only demand of penalty without any demand for tax. Section 107 relates to appeals to Appellate Authority, and section 112 relates to appeals to Appellate Tribunal.
Supply of goods warehoused in a Special Economic Zone or in a Free Trade Warehousing Zone to any person before clearance: Schedule III of CGST Act has been amended, w.e.f. 01.7.2017 by inserting a new clause (aa) in paragraph 8 of Schedule III of the Central Goods and Services Tax Act, to provide that the supply of goods warehoused in a Special Economic Zone or in a Free Trade Warehousing Zone to any person before clearance for exports or to the Domestic Tariff Area shall be treated neither as supply of goods nor as supply of services. It further amends Explanation 2 of Schedule III of the Central Goods and Services Tax Act, w.e.f. 01.07.2017 to clarify that the said explanation would be applicable in respect of clause (a) of paragraph 8 of the said Schedule. It further amends Schedule III of CGST Act, w.e.f. 01.07.2017 by inserting Explanation 3 to define the terms ‘Special Economic Zone’, ‘Free Trade Warehousing Zone’ and ‘Domestic Tariff Area’, for the purpose of the proposed clause (aa) in paragraph 8 of said Schedule. No refund of tax already paid will be available for the aforesaid activities or transactions.
Customs Dut
Insertion of new sub section in Section 18 – Provisional assessment of duty: A new sub-section (1B) has been inserted in Section 18 of the Customs Act, so as to provide definite time limit of two years for finalisation of provisional assessment. It also provides that this time period may be extended by the Commissioner of Customs for a further period of one year if sufficient cause is shown. Further, it also provides that, for the pending cases, the time-limit shall be reckoned from the date of assent of the Finance Bill. A new sub-section (1C) has also been inserted to provide for certain grounds on which the time-limit of two years for finalizing provisional assessment shall remain suspended.
Insertion of New Section 18A for voluntary revision of entry post clearance: A new section 18A has been inserted after Section 18 of the Customs Act, for voluntary revision of entry post clearance so that the importers and exporters may revise any entry that is made in relation to the goods within a prescribed time and according to certain conditions as may be prescribed. It also provides for treating such entry as self-assessment and allowing payment of duty or treating the revised entry as a refund claim under section 27. It also provides for certain cases where this section will not apply.
Insertion of new Explanation in Section 27(1) – Claim of refund of duty: A new Explanation has been inserted in section 27(1) of the Customs Act, to clarify that the period of limitation of the claim of refund consequent to the revised entry under section 18A or amendment under section 149 of the Customs Act, shall be one year from the date of payment of duty or interest.
Insertion of new clause in Explanation 1 of Section 28 – Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded: A new clause has been inserted in Explanation 1 of section 28 of the Customs Act, wherein, the relevant date in the case where duty is paid under the revised entry under section 18A is the date of payment of duty or interest.
Amendments relating to Settlement of cases Chapter XIVA of Customs Act:
- A new clause has been inserted after section 127A(d) and (e) to define Interim Board, Member of the Interim Board and pending applications.
- Two new provisos have been inserted after section 127B(5) to provide end date for receipt of applications under this section.
- A new sub-section has been inserted after section 127C(11) providing time limit for extension by the interim board.
- A new sub-section has been inserted after section 127D(2) clarifying that the powers of Settlement Commission shall be exercised by the Interim Board and further provisions of this section shall mutatis mutandis apply to the Interim Board as they apply to the Settlement Commission.
- A new sub-section has been inserted after section 127F(4) providing that the powers and functions of Settlement Commission shall be exercised or performed by the Interim Board.
- A proviso to section 127G has been inserted providing that the powers and functions of Settlement Commission shall be exercised or performed by the Interim Board.
- A new sub-section is being inserted after section 127H(3) providing that the powers and functions of Settlement Commission shall be exercised or performed by the Interim Board.
Amendment of First Schedule of Customs Tariff Act: The amendments relates to changes in rate of duty and notes/ supplementary notes for various chapters. These are as per the manner specified in Second and Third schedule of The Finance Act 2025.
Central Excise Duty
Amendments relating to Settlement of cases Chapter XIVA of Central Excise Act:
- Section 31 has been amended to define “Interim Board for Settlement” and “pending application”.
- A new section 31A has been inserted to establish one or more Interim Boards for Settlement to process the pending applications and to provide that every pending application shall be dealt by the Interim Board from the stage at which such pending application stood immediately before its constitution.
- A proviso to section 32(1) has been inserted to provide that CCESC shall cease to operate.
- Sections 32A, 32B, 32C and 32D has been amended by inserting a proviso in all these sections to provide that the provisions of these sections shall not apply on or after 1st April 2025.
- A proviso to section 32E(5) has been inserted to provide that no new application shall be made under this section.
- Section 32F has been amended to substitute the expression “Settlement Commission” with “Interim Board” so that the specified procedure on receipt of the application under section 32E shall apply to the Interim Boards. Additionally, a new sub-section is being introduced to allow the Interim Board, within three months of its constitution, to extend the time limit for disposing of pending applications by up to twelve months from its constitution, with reasons to be recorded in writing.
- It has been amended to provide that the powers and functions of the Settlement Commission under these sections shall be exercised by the Interim Boards.
Service Tax
Retrospective exemptions: Services provided or agreed to be provided by insurance companies by way of reinsurance services under the Weather Based Crop Insurance Scheme (WBCIS) and the Modified National Agricultural Insurance Scheme (MNAIS) have been exempted from service tax retrospectively for the period commencing from 1st April, 2011 and ending with 30th June, 2017. The refund shall be made of all such service tax which has been collected, but which would not have been so collected, had this provision been in force at all material times. It has further been provided that an application for the claim of refund of service tax shall be made within a period of six months from the date on which the Finance Bill, 2025 receives the assent of the President.
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Compiled by- CMA Yash Paul Bhola, MBA, ICWAI, Former Director (Finance), National Fertilizers Limited.
Disclaimer: The contents of this article are for informational purposes only. The user may refer to the notification issued by Central Government on Tax matters for specific interpretation and compliances related to a particular subject matter).
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