2025 Tax & GST Overhaul: Key Changes Every Taxpayer Must Know!

As of January 1, 2025, several significant changes in India's tax and Goods and Services Tax (GST) regulations have come into effect. These updates are designed to enhance compliance, improve security, and streamline tax processes for businesses and taxpayers. Below is a comprehensive overview of the key changes:

1. Implementation of Multi-Factor Authentication (MFA) for GST Portals

To bolster security on GST portals, the Goods and Services Tax Network (GSTN) has mandated Multi-Factor Authentication (MFA) for taxpayers. MFA requires users to verify their identity through multiple methods before accessing the system. The rollout schedule is as follows:

• From January 1, 2025: Mandatory for taxpayers with an Annual Aggregate Turnover (AATO) exceeding ?20 Crores.
• From February 1, 2025: Mandatory for taxpayers with AATO exceeding ?5 Crores.
• From April 1, 2025: Mandatory for all other taxpayers and users.

Taxpayers are advised to activate MFA promptly and ensure their registered mobile numbers are up to date to facilitate seamless access.

2. Restrictions on E-Way Bill (EWB) Generation

To enhance the accuracy and timeliness of E-Way Bills, new restrictions have been introduced:

• Document Date Limitation: EWB generation is now restricted to base documents dated within 180 days from the date of generation. For example, documents dated earlier than July 5, 2024, are ineligible for EWB generation as of January 1, 2025.
• Extension Period Limitation: The extension of EWBs is limited to 360 days from the original date of generation. For instance, an EWB generated on January 1, 2025, can only be extended up to December 25, 2025.

These measures aim to ensure the validity and relevance of EWBs in the supply chain.

3. Changes in Tax Collected at Source (TCS) Provisions

Several amendments have been made to TCS provisions under Section 206C of the Income Tax Act:

• Section 206C(1F): Effective January 1, 2025, a 1% TCS is applicable on the sale of motor vehicles and other goods specified by the Central Government, where the value exceeds ?10 lakh.
• Section 206C(1G): Revised TCS rates are introduced for remittances under the Liberalized Remittance Scheme (LRS) and overseas tour packages:

These changes are intended to increase transparency and compliance in high-value transactions.

4. Introduction of Amnesty Scheme for Waiver of Interest and Penalty

A new amnesty scheme has been introduced under Section 128A of the CGST Act, providing conditional waiver of interest or penalty for demands raised under Section 73 for the financial years 2017-18 to 2019-20. Taxpayers can avail of this waiver by paying the full amount of tax demanded on or before the notified date.

5. Relaxation in Input Tax Credit (ITC) Conditions

Amendments to Section 16(4) of the CGST Act provide relaxation in the time limit to avail ITC for the financial years 2017-18 to 2020-21. Taxpayers can now claim ITC for these periods through returns filed up to November 30, 2021, effectively extending the deadline.

6. Establishment of GST Appellate Tribunal

The constitution of the GST Appellate Tribunal and its benches has been notified, providing taxpayers with a forum for resolving disputes related to GST. This move aims to expedite the resolution process and reduce litigation.

7. Updates to E-Invoice and E-Way Bill Systems

In addition to MFA, other updates to the E-Invoice and E-Way Bill systems include:

• Enhanced validation processes to reduce errors and improve data accuracy.
• Integration with other government databases to streamline compliance.

Taxpayers are encouraged to familiarize themselves with these updates to ensure seamless operations.

Conclusion

The tax and GST changes effective from January 1, 2025, reflect the government's commitment to enhancing compliance, security, and efficiency in the tax system. Taxpayers and businesses should take proactive steps to understand and implement these changes to ensure adherence to the new regulations. Staying informed and updating internal processes accordingly will be crucial in navigating this evolving landscape.