Key Income Tax and GST Changes effective from 1st January 2025, as the new year begins, a number of important changes to the GST and income tax are scheduled to go into effect on January 1, 2025. These modifications, include adjustments to TCS rates, E-Way Bill rules, MFA requirements, and more, are intended to simplify compliance and increase the effectiveness of tax administration. Here is a detailed review:
1. Changes to Tax Collected at Source (TCS) Rates
With effect from January 1, 2025, the following changes have been made to Section 206C(1F) of the Income-tax Act.
TCS Applicability:
- Motor vehicles: A 1% TCS is applied to sales of motor vehicles costing more than ₹10 lakh.
- Other goods: any goods specified by the Central Government through notification are subject to TCS at 1%.
Read also: GST Rate For Old Cars And Eletric Vehicles – 18% GST
2. Multi-Factor Authentication (MFA) for E-Way Bill and E-Invoice Portals
- Old scenario:
Since August 20, 2023, MFA has been required for taxpayers whose Annual Aggregate Turnover (AATO) exceeds ₹100 crores, and since September 11, 2023, it has been optional for those whose AATO exceeds ₹20 crores.
- Changes:
Starting January 1, 2025, taxpayers with AATOs over ₹20 crores have to comply.
For taxpayers with AATOs over ₹5 crores, mandatory as of February 1, 2025.
Mandatory for all users and taxpayers as of April 1, 2025.
To prevent last-minute problems, taxpayers are encouraged to activate MFA right away and make sure their registered cell numbers are updated with their the GSTIN.
Read also: 18% GST Rates For Popcorn, Sparking Online Debate
3. Changes to E-Way Bill (EWB) Rules
- Restrictions on EWB Generation:
As of January 1, 2025, just documents dated within 180 days of the generation date will be eligible for EWB generation. For example ,Documents dated before July 5, 2024 will not be able to generate EWBs on January 1, 2025.
- Restricted EWB Extension Period:
EWB extensions are only allowed for 360 days after the date of original generation. An EWB created on January 1, 2025, for example, can only be extended until December 25, 2025.
4. Filing of Income Tax Returns (ITR) for FY 2023-24
December 31, 2024, was the last day to file amended or late ITRs for FY 2023–2024.
Refunds cannot be claimed under ITR-U; only ITR-U (Updated Return) can now be filed.
Read also: GST Registration Cancellation – How to cancel GST Registration?
5. Announcements from the 55th GST Council Meeting
At the 55th meeting of the GST Council, a number of initiatives and rate modifications were announced. These include of the following:
- Composite Taxpayers:
Exemption from Reverse Charge Mechanism (RCM) when renting commercial property from an unregistered person.
- GSTR-9C Late Fee Waiver:
If GSTR-9 has previously been filed, there are no late costs for GSTR-9C filings for FY 2017–18 through FY 2022–23.
You have until March 31, 2025, to file your pending GSTR-9C without paying penalties.
Read also: How to Pass GST Accounting Entries in GST Regime
6. Amendment to Section 200(3) of the Income-tax Act
limitations on Correction Statements:
After six years from the end of of a financial year in which the original statement was due, no correction statement for TDS/TCS shall be allowed. Only until March 31, 2025, will correction statements for FY 2007–08 through FY 2018–19 be accepted.
7. Invoice Management System (IMS)
On the GST portal, the Invoice Management System (IMS) is currently functioning.
In 2025, it is anticipated to become required in order to generate GSTR-2B.
Effect on Filing GSTR-3B:
Since IMS actions start on the 14th of the month and the GSTR-3B filing deadline is still the 20th, taxpayers will have less time to reconcile and file GSTR-3B now that IMS is required.
Read also: e-Invoicing under GST: a Step towards Reduced GST Compliance
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