Important Amendments and Changes in GST which should be noted from April 1, 2025: An Analysis

Introduction

The Goods and Services Tax (GST) framework continues to evolve as it is about to complete its eighth year of implementation ever since its rollout on 01st July 2017. This set of amendments, though it would have been implemented from time to time earlier, they have assumed more importance from April 1, 2025, as it brings in significant changes that are aimed at improving compliance, enhancing security measures, and streamlining tax processes. These modifications will impact all registered persons across various sectors, making it imperative for both tax officers and tax professionals, apart from business entities, to thoroughly understand these new regulations to ensure compliance and avoid potential litigation. More importantly, these changes are expected to bring in more discipline in tax compliance and further make the stakeholders responsible. This article aims to provide a detailed analysis of Eight (08) key GST amendments that should be carefully noted for compliance right from April 1, 2025, the beginning of the new Financial Year 2025-26 including their legal basis and the positive impact they are expected to have on Taxpayers and the tax administration system.

1. Multi-Factor Authentication (MFA) for All Taxpayers

All GST taxpayers will be required to implement the Multi-Factor Authentication (MFA) when accessing GST portals. This move aims to secure sensitive financial data and prevent unauthorized access. Taxpayers must ensure that their Authorized Signatories are equipped with the necessary tools and knowledge to comply with this requirement.  This process derives its authority through Section 146 of the CGST Act, 2017, which empowers the Government to prescribe carrying out such other functions for electronic records on the “common portal”. Multi-factor authentication (MFA) represents a significant enhancement in the security framework of the GST portal. It requires taxpayers to validate their identity through at least two different authentication factors, which include a Password / Mobile device security code like OTP through SMS or ‘Sandes Application or the ‘ NIC-GST-Shield’ Application.  The GST Network has developed a dedicated mobile application for this purpose, which generates time-based one-time passwords (TOTPs). Alternatively, taxpayers can use SMS-based OTPs. The implementation is expected to have the following positive impacts. i. Enhanced Data Security: The MFA requirement significantly reduces the risk of unauthorized access to taxpayer accounts, protecting sensitive financial data from potential breaches. ii. Reduction in Fraudulent Activities: By adding multiple layers of authentication, the system creates robust barriers against identity theft and fraudulent transactions. iii. Increased Accountability: With stronger authentication protocols, there is greater certainty about the identity of individuals accessing the GST portal, enhancing accountability. iv. Alignment with Global Standards: This move aligns India’s GST system with international best practices in cybersecurity, which is particularly important for businesses engaged in international trade. v. Trust Building: Enhanced security measures foster greater trust in the digital tax ecosystem, encouraging more businesses to embrace digital compliance tools. Taxpayers must ensure that all authorized signatories within their organization are properly equipped with the necessary tools and knowledge to comply with this requirement. The GSTN has announced helpdesk support and detailed guidance materials to facilitate this transition. In a Phased Implementation process MFA became mandatory for taxpayers with an Aggregate Annual Turnover (AATO) exceeding ₹20 crore from January 1st, 2025, from February 1st, 2025, it became mandatory for taxpayers with an AATO exceeding ₹5 crore and finally, from April 1st, 2025, it is mandatory for all other taxpayers and users.

2. E-Way Bill & e-Invoice Enhancements: –

The generation of E-Way Bills will be restricted to invoices issued within a period preceding 180 days from the date of invoice, with extensions capped at a maximum of 360 days. Additionally, updated versions of the E-Way Bill and E-Invoice systems are being rolled out by the National Informatics Centre (NIC) to improve security and compliance. Additionally, all taxpayers, irrespective of turnover, should mandatorily use 2FA for e-invoice and e-way bill generation from 1st April 2025. These changes are made under the authority granted by Section 68 of the CGST Act, 2017, which deals with the inspection of goods in movement. So, the Temporal Restrictions on the basis of the Advisory issued by GSTN on 17-12-2024 are that E-Way Bills can now only be generated for invoices issued within the preceding 180 days from the date of generation. The maximum extension period for E-Way Bills has been capped at 360 days from the from the original document generation date. While the validity period of E-Way Bills remains unchanged, it cannot be extended beyond the 360-day threshold time provided. The implementation is expected to have the following positive impacts. i. Improved Tax Compliance: The 180-day restriction prevents backdating of invoices, thereby reducing tax evasion possibilities. ii. Enhanced Monitoring: The upgraded system provides tax authorities with better tools to monitor the movement of goods, particularly for high-value consignments. iii. Better Data Analytics: The system upgrades enable more sophisticated data analytics, helping identify patterns of non-compliance and potential tax leakage. iv. Environmental Benefits: The restriction on excessive backdating of invoices indirectly promotes the timely delivery of goods, potentially reducing unnecessary storage and associated environmental costs. The Taxpayers need to adapt their movement of goods and invoicing processes to align with these new timelines and system upgrades. They should also ensure that their logistics and transportation partners are thoroughly briefed on these changes to ensure smooth operations. All taxpayers, irrespective of turnover, should mandatorily use 2FA for e-invoice and e-way bill generation from 1st April 2025.

3. Mandatory Sequential Filing of GSTR-7

Tax Deductors (TDS) filing GSTR-7 (Tax Deducted at Source under Section: 51 of CGST Act 2017) will now need to follow a sequential filing order without skipping any previous returns. This change aims to streamline TDS collection, improve reconciliation, and enhance the efficiency of the TDS system. The requirement for the sequential filing of GSTR-7 has been introduced through an amendment to Rule 66 of the CGST Rules, 2017, via Notification 17/2024, GSTN Advisory read with Section 51 of the CGST Act, 2017, which deals with Tax Deducted at Source (TDS).  The amendment introduces a critical change in the filing process for GSTR-7, the return form for Tax Deducted at Source. Previously, tax deductors could file GSTR-7 for any tax period without necessarily having filed returns for preceding periods. Under the new regime, tax deductors must file GSTR-7 returns sequentially without skipping any tax period. The system will prevent the filing of GSTR-7 for the current period unless all previous periods’ returns have been filed. Late fees for the delayed filing of GSTR-7 have been rationalized to encourage compliance with this sequential requirement. Even if there is no TDS deduction, Nil returns have to be filed to maintain continuity. The implementation is expected to have the following positive impacts. i. Improved TDS Reconciliation: Sequential filing ensures continuous and chronological tracking of TDS deductions, making reconciliation more accurate and less cumbersome with proactive Compliance Culture ii. Better Compliance Monitoring: The system provides tax authorities with a clear chronological view of TDS compliance, facilitating better monitoring. For both deductors and tax authorities, sequential filing creates clearer audit trails, making verification processes more straightforward iii. Reduced Data Discrepancies: Sequential filing minimizes data gaps and inconsistencies between different tax periods. This amendment particularly affects government departments, PSUs, local authorities, and large corporations that regularly deduct TDS under GST. These entities need to establish robust processes to ensure timely and sequential filing of GSTR-7 returns. The sequential filing mandate officially kicked in on November 1, 2024. An advisory to this effect has been issued by GSTN on 04-12-2024.

4. Biometric Authentication for Company Directors

All promoters and directors of companies, including private, public, and foreign entities, must complete biometric authentication at any GST Suvidha Kendra (GSK) in their home state. This change simplifies the authentication process, making it easier for New Registrations to comply without having to visit specific jurisdictional GSKs where the principal place of business is declared.  The biometric authentication requirement for company directors has been introduced through amendments to Rule 8 and Rule 9 of the CGST Rules, 2017, via Notification No. 20/2025-Central Tax, dated March 18, 2025. These amendments derive their authority from Section 25 of the CGST Act, 2017, which deals with the procedure for registration. Now, Directors can complete the authentication at any GSK in their home state, removing the earlier restriction of visiting only jurisdictional GSKs. The authentication process includes fingerprint scanning, facial recognition, photograph capture, and physical verification of documents. The implementation is expected to have the following positive impacts. i. Prevention of Fraudulent Registrations: The biometric verification creates a robust barrier against fraudulent registrations, which have been a significant concern with fake applications. ii. Enhanced Director Accountability: By physically authenticating directors, the system creates greater accountability and reduces instances of dummy directors. iii. Streamlined Registration Process: Despite adding an additional verification step, the overall process becomes more streamlined by allowing authentication at any GSK within the home state. iv. Greater Security in the GST Ecosystem: The measure adds another layer of security to the GST registration process, protecting the integrity of the tax system, which aligns with KYC norms prevalent in the banking sector, creating uniformity across financial systems. Companies must plan for this requirement well in advance, especially those with multiple directors or directors who travel frequently. This facility across India has been introduced w.e.f. 04-03-2025. An advisory to this effect has been issued by GSTN on 03-04-2025.

5. Mandatory Input Service Distributor (ISD) Mechanism:

Taxpayers will be required to mandatorily implement the ISD mechanism for distributing ITC on common services like rent, advertising, and professional fees across various GST registrations under the same PAN interstate/intrastate / FCM /RCM in all such cases. Non-compliance with this mandate might lead to penalty and possible denial of ITC too.  The mandatory implementation of the Input Service Distributor (ISD) mechanism has been introduced through amendments to Rule 54 and Rule 39 of the CGST Rules, 2017, via Notification No. 21/2025-Central Tax, dated March 20, 2025. These amendments are made under the authority of Section 20 of the CGST Act, 2017, which deals with the manner of distribution of credit by an Input Service Distributor. The amendment makes it mandatory for taxpayers to implement the ISD mechanism for distributing Input Tax Credit (ITC) on common services across various GST registrations under the same PAN. Previously, this was optional, leading to inconsistent practices among taxpayers.  The scope will illustratively apply for all common services like rent, advertising, professional fees, maintenance, and other shared services, covers distribution of ITC across all GST registrations under the same PAN, regardless of whether they are in the same state or different states, includes both forward charge mechanism (FCM) and reverse charge mechanism (RCM) services. The implementation is expected to have the following positive impacts. i. Equitable Distribution of ITC: The mandatory ISD mechanism ensures that ITC on common services is distributed equitably across all registrations, reflecting their actual consumption. ii. Standardized Practices: The mandatory nature of the requirement creates uniformity in how businesses handle ITC distribution, making compliance monitoring more effective. The structured approach to ITC distribution enhances overall credit management, potentially reducing working capital requirements iii. Enhanced Transparency: The ISD mechanism creates greater transparency in how common expenses are allocated across different business units or locations. The mandatory documentation requirements create clearer audit trails for tax authorities, reducing disputes during assessments. Taxpayers with multiple GST registrations must prioritize setting up the ISD registration and implementing robust processes for ITC distribution. This may require updates to accounting software and ERP systems to ensure accurate tracking and allocation of common expenses. This change is enforced under Notification No. 16/2024-Central Tax, dated August 6, 2024, which makes ISD provisions mandatory from April 1, 2025.

6. GST Rate Adjustments for Hotels and Used Cars

The “Declared Tariff” concept in respect of Hotels  will be abolished, with GST now applied to the actual amount charged to customers. Hotels charging over ₹7,500 per unit per day for accommodation will attract an 18% GST rate on restaurant services, along with ITC benefits. The GST rate on the sale of used cars has been revised from 12% to 18% on the margin value uniformly irrespective of size, category or ground clearance. Small cars and EVs were attracting 12% which has been harmonized now. The concept of “Declared Tariff” has been abolished, replacing it with actual transaction value. GST will now be levied on the actual amount charged to customers, eliminating previous complexities. Hotels charging over ₹7,500 per unit per day for accommodation will attract 18% GST.  Full Input Tax Credit is now available for these services, removing previous restrictions. In respect of buying and selling of used cars, a Uniform GST rate of 18% on the sale of used cars, regardless of size, category, or ground clearance has been fixed.  This is required to be paid on the Margin Value in terms of Rule 32(5) of the CGST Rules, 2017 which provides the mechanism for the scope of supply and value of GST where the person is a second-hand goods dealer. The value of supply will be calculated as the difference between the purchase price of the goods and the selling price of the goods, and where the value of supply is negative, it shall be ignored. – Previous differential rates (12% for small cars and EVs, 18% for others) have been harmonized.  The implementation is expected to have the following positive impacts. (i) For Hotels: Simplified Compliance: Elimination of the “Declared Tariff” concept removes a significant compliance burden for the hospitality industry and reduces ambiguity and potential disputes between taxpayers and tax authorities Fair Taxation: Taxation based on actual transaction value ensures that taxes are directly proportional to the actual price paid by customers. Increased ITC Availability: Full ITC availability for premium hotels (charging over ₹7,500) improves their overall tax efficiency. (ii) For Used Cars: Uniform Taxation: The harmonized rate of 18% creates a level playing field across all categories of used cars. The uniform tax rate encourages more transparent pricing practices in the second-hand car market. Simplified Valuation: Clear guidelines on valuation methodology reduce disputes and uncertainty. Enhanced Revenue Collection: The harmonized rate is expected to improve overall tax collection from this sector. These rate adjustments represent a significant step towards simplifying the GST structure for these sectors while ensuring fair taxation principles. These changes will take effect from 01-04-2025.

7. New Invoice Series and Turnover Calculation

All taxpayers must start a new invoice series from April 1, 2025,.The invoice numbering must be sequential and non-repetitive within the financial year.  The new series must be maintained separately for different types of invoices (regular, debit note, credit note, etc.). Special provisions apply for taxpayers using multiple series for different business verticals. Taxpayers using e-invoicing must ensure their ERP/accounting systems are configured to generate the new series.  Taxpayers with AATO exceeding ₹5 crore in any of the preceding financial years are mandated to issue e-invoices.

8. Changes in GST Registration Process

Rule 8 of the CGST Rules, 2017 has been updated. Applicants opting for Aadhaar authentication must undergo biometric verification and photo capturing at a GST Suvidha Kendra, followed by document verification for the Primary Authorized Signatory. Non-Aadhaar applicants must visit a GSK for verification as well. Delays in completing these processes will result in the non-generation of the Application Reference Number (ARN), causing registration delays.

9. Enhanced Credit Note Compliance

Recipients of credit notes must now accept or reject them through the Integrated Management System (IMS) to prevent mismatches in ITC claims. This ensures transparency and accuracy, reducing discrepancies in tax filings and improving ITC management.