CBIC notifies the Finance Act, 2025 amendments in GST Law with Effect from 1st October 2025

The Ministry of Finance vide Notification No. 16/2025–Central Tax dated 17th September 2025 has appointed 1st October 2025 as the date from which key provisions of the Finance Act (No. 7), 2025 will come into force. The notified changes under GST law include amendments in definitions such as explicit inclusion of interstate RCM transactions under Input Service Distributor (ISD), insertion of “unique identification marking” for implementation of a Track and Trace Mechanism, and clarification of “local fund” and “municipal fund.” Provisions relating to vouchers have been omitted, retrospective clarification provided for “plant and machinery,” reduced pre-deposit for penalty appeals introduced, and new penalty provisions under Section 122B for non-compliance with Track and Trace added. Amendments also streamline credit notes, return filing, and exempt warehoused SEZ/FTWZ transactions from GST.

Key GST Changes Effective from 1st October 2025

1. Amendments in Definitions (Section 2)
   • Local Authority: Explanation inserted to define Local Fund and Municipal Fund.
   • Unique Identification Marking (Section 2(116A)): Introduced to facilitate Track & Trace Mechanism for evasion-prone commodities.
2. Omission of Provisions Relating to Vouchers
   • Sections 12(4) & 13(4) dealing with time of supply of vouchers omitted.
3. Section 17(5) Amendment
   • Phrase “plant or machinery” replaced with “plant and machinery”, retrospective from 01.07.2017, overriding past rulings.
4. Section 20 – ISD Credit Distribution
   • Explicit inclusion of interstate RCM transactions under ISD mechanism.
5. Section 34(2) – Credit Notes
   • Reduction in supplier’s output tax liability allowed only if:
     • Recipient reverses ITC; and
     • Tax incidence is not passed to another party.
6. Section 39 – Return Filing
   • Govt empowered to prescribe conditions & restrictions in addition to timelines for return filing.
7. Reduced Pre-deposit for Penalty Appeals
   • Section 107(6): Pre-deposit reduced to 10% of penalty (earlier 25%).
   • Section 112(8): For appeals before Appellate Tribunal in penalty-only cases, pre-deposit fixed at 10% of penalty.
8. New Penalty for Track & Trace Non-compliance (Section 122B)
   • Higher of ₹1,00,000 or 10% of tax payable on such goods.
   • In addition to other penalties.
9. New Section 148A – Track & Trace Mechanism
   • Govt empowered to implement unique digital stamping/marking for specified commodities to curb tax evasion.
10. Schedule III Amendment (Retrospective w.e.f. 01.07.2017)

• Transactions involving goods warehoused in SEZ/FTWZ before clearance for export or DTA not treated as supply under GST.

The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2025/09/No.-16-2025-–-Central-Tax.pdf

The Complete Document can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2025/02/Key-Highlights-of-Proposed-Changes-under-GST-in-Union-Budget-2025-26-for-easy-digest.pdf