Indirect Tax Reforms Unveiled in Finance Bill 2025: Key Highlights

The Finance Bill, 2025, introduces a comprehensive overhaul of India`s indirect tax framework, with significant amendments across Customs, Central Excise, and Goods and Services Tax (GST) laws. These changes aim to streamline tax administration, promote ease of doing business, and align with international trade norms.

Customs Act, 1962 – Key Amendments

• Provisional Assessment Finalization: A new sub-section (1B) in Section 18 sets a definitive two-year limit for finalizing provisional assessments, extendable by one year with valid reasons.
• Voluntary Revision of Entry: Introduction of Section 18A allows importers/exporters to revise entries post-clearance, facilitating self-assessment and duty payments.
• Refund Claims Clarification: Amendments in Section 27 clarify a one-year limitation for refund claims post-duty payment under revised entries.
• Interim Board for Settlement: Powers of the Settlement Commission will transition to the newly defined Interim Board under Section 127A, with clear timelines for case resolutions.

Customs Tariff Act, 1975 – Tariff Rationalization

• Reduction in Tariff Rates: Slabs reduced from 25-40% to 20% and 100-150% to 70% on various goods, including marble, granite, footwear, vehicles, and electronic items.
• Creation of New Tariff Items: Specific categories for rice, makhana products, waste oils, and dual-use chemicals to improve goods identification.
• Changes Effective: Most changes will be effective from May 1, 2025.

Duty Rate Adjustments

• Increases: Tariff rates on knitted fabrics and interactive flat panel displays rise to 20%.
• Decreases: Significant reductions on items like solar modules, marble, granite, synthetic flavoring essences, and various footwear categories.

Central Excise Act, 1944 – Structural Changes

• Establishment of the Interim Board for Settlement to handle pending applications.
• Discontinuation of the Central Excise Settlement Commission from April 1, 2025.

Goods and Services Tax (GST) Reforms

• Input Tax Credit (ITC) Distribution: Amendments to allow ITC distribution for inter-state supplies under reverse charge mechanism.
• Track and Trace Mechanism: New provisions (Sections 122B & 148A) for tracking specified commodities to curb tax evasion.
• Appeals Process Simplified: Mandatory 10% pre-deposit of penalties for GST appeals without tax demands.
• Clarifications in Schedule III: Transactions involving Special Economic Zones (SEZs) clarified to be neither goods nor service supplies, effective retrospectively from July 1, 2017.

Agriculture Infrastructure and Development Cess (AIDC) & Social Welfare Surcharge (SWS)

• Revised AIDC rates on items like marble, granite, and solar modules.
• SWS exemptions extended to various goods, including electronic toys, solar cells, and luxury vehicles.

These reforms signify a strategic shift towards simplifying India’s indirect tax regime, enhancing compliance, and fostering a more business-friendly environment.