GST Rule Changes for FY 2025–26

The government is introducing major reforms to the current Goods and Services Tax (GST) framework aimed at improving ease of doing business, enhancing tax governance, boosting digital security, and ensuring greater operational consistency. With the new financial year now underway, businesses must act promptly to align with the latest GST updates. In this article, we will look into the key GST rule changes for FY 2025-26 and what they mean for businesses.

Mandatory Input Service Distributor (ISD) Registration 

Previously, businesses with multiple GST registrations under the same PAN had the flexibility to either use the Input Service Distributor (ISD) mechanism or adopt a cross-charge model to allocate common input services, such as rent, audit fees, and software licenses, across their various units. While many favored the cross-charge method for its perceived simplicity, it often led to complications in ITC distribution and tax reconciliation.

However, effective April 1, 2025, it will be compulsory for such taxpayers to obtain ISD registration. Under the revised framework, businesses must issue ISD invoices and file GSTR-6 returns to distribute Input Tax Credit (ITC) to different branches. This move is aimed at enhancing transparency, traceability, and ensuring standardised compliance in the allocation of shared input services.

Click here to learn more about Mandatory ISD Registration Under GST from 1st April 2025

Amendments to GSTR-7 and GSTR-8 Formats Effective from February 11, 2025

Through Notification No. 09/2025–Central Tax, dated February 11, 2025, the government has introduced significant revisions to the formats of GSTR-7 and GSTR-8 to enhance transparency, improve compliance accuracy, and enable better data validation by tax authorities.

GSTR-7 (TDS Return by Tax Deductors):

The updated format now requires invoice-level and document-wise details of tax deducted at source. Key additions include:

• GSTIN of the deductee
• Invoice number and date
• Invoice value and amount paid
• Tax deducted under CGST, SGST/UTGST, and IGST

These changes aim to improve the reconciliation of TDS claims by suppliers and strengthen the audit trail for tax authorities.

GSTR-8 (TCS Return by E-Commerce Operators):

Form GSTR-8 has been modified to include more granular details of supplies made through e-commerce platforms. The revised form now facilitates:

• Better visibility of transaction-level sales data
• Enhanced accuracy in Tax Collected at Source (TCS) reporting
• Streamlined reconciliation for sellers listed on e-commerce portals

These updates are designed to support improved reporting consistency and help prevent misreporting or mismatches in tax filings.

Taxpayers affected by these changes—including TDS deductors, government entities, and e-commerce operators—must update their compliance systems and ensure that their accounting software can capture the new data requirements going forward.

Revised e-Way Bill and E-Invoice Timelines from April 1, 2025

New Restrictions on e-Way Bill Generation and Extension

To strengthen the monitoring of goods movement and reduce misuse, the government has introduced new time-based restrictions on e-Way Bill generation and extension:

• Generation Restriction: Starting January 1, 2025, e-Way Bills can only be generated for documents issued within the preceding 180 days. For example, invoices dated before October 3, 2024, will become ineligible for e-Way Bill generation on or after April 1, 2025.
• Extension Limitation: The extension of any e-Way Bill will now be limited to a maximum of 360 days from its original generation date. For instance, an e-Way Bill created on April 1, 2025, can only be extended up to March 27, 2026.

These changes are designed to ensure timely and accurate documentation of goods in transit and to prevent backdated entries that may result in tax evasion.

30-Day Reporting Rule for E-Invoices Expanded to More Taxpayers

In a move to further tighten e-invoicing compliance, the government has expanded the 30-day reporting deadline on the Invoice Registration Portal (IRP):

• Effective April 1, 2025, businesses with an Annual Aggregate Turnover (AATO) exceeding ₹10 crore must report B2B e-invoices to the IRP within 30 days from the invoice date.
• Previously, this rule applied only to taxpayers with AATO above ₹100 crore.

Failure to report invoices within this 30-day window will result in rejection of the Invoice Reference Number (IRN), leading to:

• Ineligibility to claim Input Tax Credit (ITC)
• Compliance delays and downstream disruptions in the supply chain

Taxpayers are advised to update their ERP/accounting systems and internal processes to comply with these stricter timelines, ensuring smooth and uninterrupted GST compliance.

Multi-Factor Authentication (MFA) Mandatory for All GST Taxpayers

Starting this financial year, all GST taxpayers will be required to adopt Multi-Factor Authentication (MFA) to access the GST portals. This security upgrade is designed to protect sensitive financial data and prevent unauthorised access. Businesses must ensure their Authorized Signatories are well-equipped and trained to comply with this new requirement.

MFA significantly strengthens the GST portal’s security infrastructure by requiring users to verify their identity using at least two independent authentication factors. These may include:

• A password
• A one-time passcode (OTP) sent via SMS

An OTP generated through the ‘Sandes’ app or the ‘NIC-GST-Shield’ app, both developed by the GST Network

To facilitate this, the GSTN has introduced a dedicated mobile app that generates Time-Based One-Time Passwords (TOTPs). Alternatively, SMS-based OTPs remain available for users preferring traditional methods.

Expected Benefits of MFA Implementation:

• Enhanced data security for taxpayers and government systems
• Reduced risk of unauthorized access or fraudulent filings
• Greater trust in digital compliance processes
• Streamlined authentication experience through GSTN-supported mobile apps

Mandatory Sequential Filing of GSTR-7 for TDS Deductors

Effective November 1, 2024, a new rule mandates that GSTR-7 returns—filed by Tax Deductors under Section 51 of the CGST Act, 2017—must be submitted in strict sequential order. This reform aims to improve TDS compliance, streamline reconciliation processes, and enhance transparency within the GST framework.

Key Changes:

• Sequential Filing Requirement: Tax deductors can no longer skip tax periods when filing GSTR-7. The portal will block current filings until all previous GSTR-7 returns are submitted, including Nil returns.
• Mandatory Filing of Nil Returns: Even if no tax has been deducted in a given period, a Nil return must still be filed to maintain sequence and continuity.
• Rationalised Late Fees: To encourage compliance, late fees for GSTR-7 have been adjusted, reducing the penalty burden while reinforcing timely filing.

What Taxpayers Need to Do:

• Review current GSTR-7 filing processes and identify any missed periods.
• File Nil returns where applicable to avoid system blockage.

Biometric Authentication Now Mandatory for Company Directors

Starting March 4, 2025, all company promoters and directors across private, public, and foreign entities must undergo biometric authentication at any GST Suvidha Kendra (GSK) within their home state. This crucial step simplifies the registration process and strengthens the security framework of the GST system.

Key Highlights of the Update:

• Location Flexibility: Directors can now complete their biometric authentication at any GSK in their home state, eliminating the previous requirement to visit GSKs in the jurisdiction of the principal place of business.
• What the Biometric Process Involves:
• Fingerprint scanning
• Facial recognition
• On-site photograph capture
• Physical document verification
• Applicability: Mandatory for new GST registrations involving corporate entities, including foreign companies operating in India.
• Implementation Date: Facility available nationwide from March 4, 2025, as per the GSTN Advisory dated April 3, 2025.

For more details on biometric authentication, click here

GST Rate Reforms for Hotels and Used Cars – Effective April 1, 2025

In a significant move aimed at simplifying tax compliance and ensuring fair and transparent taxation, the government has announced key GST rate adjustments for the hotel and used car sectors, effective from April 1, 2025.

A. GST Changes for the Hospitality Sector (Hotels)

Key Updates:

• The "Declared Tariff" concept is abolished.
• GST will now be levied on the actual transaction value—i.e., the price actually charged to the customer at the time of supply.
• Accommodation units charging more than ₹7,500 per day will attract 18% GST.
• Full Input Tax Credit (ITC) will now be available for hotel accommodation and associated restaurant services in such cases.

Expected Positive Impacts:

• Simplified Compliance: Eliminates the confusion and burden of maintaining tariff declarations, reducing disputes during assessments.
• Fair Taxation: Ensures taxes reflect the actual price paid by customers, rather than pre-declared or outdated tariffs.
• Boost in ITC Benefits: Premium hotels benefit from enhanced credit availability, improving cash flows and reducing effective tax costs.

B. GST Changes for Sale of Used Cars

Key Updates:

• A uniform GST rate of 18% will now apply on the margin value for all categories of used cars, irrespective of engine size, category, ground clearance, or whether electric or fuel-based.
• Previous rate differentiation (e.g., 12% for small cars and EVs, 18% for others) has been harmonised.· 

Valuation Mechanism (As per Rule 32(5) of CGST Rules, 2017):

• GST is payable on the margin = Selling Price – Purchase Price.
• If the result is negative (a loss), no GST is applicable on that transaction.

Applicability:

Applies to dealers in second-hand goods, as defined under GST provisions.

Learn more: GST on Used Cars: New 18% Tax Rate Explained

New Invoice Series and Turnover-Based Compliance from April 1, 2025

As part of the FY 2025-26 GST compliance framework, all registered taxpayers are required to start a fresh invoice series from April 1, 2025, in alignment with statutory invoicing norms.

Key Requirements:

• New Series for Each Financial Year: All taxpayers must initiate a new, unique invoice series at the beginning of each financial year.
• Sequential and Non-Repetitive Numbering: Invoices must follow a sequential, non-duplicative numbering format. Numbering should not reset mid-year.
• Separate Series by Document Type: Different types of GST documents—invoices, credit notes, debit notes, etc.—must have distinct and independently maintained series.
• Multiple Series Allowed for Business Verticals: Businesses with distinct branches, divisions, or business lines may use multiple series, provided each is clearly identifiable and consistently applied.
• For e-Invoicing Taxpayers: Taxpayers with an Aggregate Annual Turnover (AATO) exceeding ₹5 crore in any preceding financial year are mandated to generate e-invoices.

Ensure ERP/accounting systems are configured to reflect the new invoice series before April 1, 2025.

GST Waiver Scheme 2024 – Amnesty for FY 2017-18 to 2019-20

To support taxpayers facing legacy issues from the early years of GST implementation, the government has introduced the GST Waiver Scheme 2024, also known as the Amnesty Scheme, under Section 128A of the CGST Act, 2017.

Key Provisions:

• Eligibility Period: Applies to tax dues from FY 2017-18 to 2019-20.
• Benefits Offered: Full waiver of interest and penalties, provided the entire principal tax amount is paid by March 31, 2025.
• Filing Requirements: Taxpayers must submit Form SPL-01 or SPL-02, as applicable. The application must be made within three months of the new financial year, i.e., by June 30, 2025.

  Key Takeaways for Taxpayers

• ISD Registration Mandatory from April 1, 2025, for businesses with multiple GSTINs under one PAN.
• GSTR-7 & GSTR-8 Formats Updated effective February 11, 2025 – invoice-level TDS/TCS details required.e-Way Bill Validity Restricted – only for invoices issued within 180 days; extension capped at 360 days.
• The 30-Day E-Invoice Reporting Rule now applies to businesses with AATO over ₹10 crore.
• Mandatory Multi-Factor Authentication (MFA) for all GST portal users from FY 2025–26.
• Sequential GSTR-7 Filing enforced from November 1, 2024 – no skipping of tax periods allowed.
• Biometric Authentication Mandatory for company directors at GST Suvidha Kendras from March 4, 2025.
• Hotel GST Based on Actual Transaction Value – Declared Tariff concept abolished; ITC fully allowed.
• Uniform 18% GST on Used Cars on margin value – rate harmonised across all vehicle types.
• New Invoice Series Required from April 1, 2025 – sequential, unique, and year-specific.
• GST Waiver Scheme (Amnesty) available for FYs 2017–18 to 2019–20 – pay principal by March 31, 2025, to get interest & penalty waiver.

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