Revising HSN and SAC Codes in ERP After GST 2.0: Complete Step-by-Step Guide

Revising Your HSN / SAC Codes in ERP Post-GST 2.0: A Practical Walkthrough

Unlock Compliance and Accuracy with the Latest GST 2.0 HSN/SAC Updates

India’s GST landscape received a significant update with GST 2.0, introducing a revised list of HSN (Harmonised System of Nomenclature) and SAC (Service Accounting Codes). Businesses across India now face a vital challenge: revising their ERP and accounting systems to align with the new classification and rate structure. Failure to do so can cause invoice mismatches, GST filing errors, and audits complications.

This comprehensive tutorial dives deep into how you can update your HSN and SAC codes practically with your ERP system while maintaining audit trails and ensuring compliance.

Why Revising HSN/SAC Codes Post-GST 2.0 Matters

• Updated Classifications: GST 2.0 refined codes for better alignment to products and services under the revised tax slabs.
• Compliance Risks: Using outdated codes can trigger mismatches in GSTR filings, leading to penalties or blocked input tax credit (ITC).
• System Readiness: ERP systems need bulk updates and accurate mapping for smooth transaction processing and reporting.

How to Obtain the Revised HSN/SAC Code List and Official Guidebook

The Ministry of Commerce & Industry and CBIC have jointly published the revised HSN/SAC lists accompanied by an official Guidebook on Mapping. Here is how you can access them:

• DPIIT Website: Visit the Department for Promotion of Industry and Internal Trade (DPIIT) official site for downloadable PDFs containing the new codes.
• Central Board of Indirect Taxes and Customs (CBIC): Latest circulars and updates from CBIC provide detailed mapping methodologies.
• GST Portal: Sometimes, updated code lists are made available directly on the GST portal under Downloads.
• Official Notifications: Check the Gazette notifications updating the GST rates and classifications.

Key Resources to Download:

• HSN/SAC Revised Master List
• Guidebook on Mapping Old to New Codes
• Updated GST Rate Chart with Corresponding Codes

Step-by-Step Instructions for Updating ERP / Accounting Software

ERP upgrades for HSN/SAC changes can be complex if done manually. Here’s a tested workflow that ensures smooth migration:

1. Backup Existing Data

Before any changes, backup your ERP transaction data and master tables to allow rollback if needed.

2. Analyze Old vs New Code List

• Use the Guidebook on Mapping to identify exact matches or changes.
• Flag items that require manual review due to ambiguous mapping.

3. Bulk Mapping Upload

• Export your current HSN & SAC master data list.
• Use Excel or CSV to prepare a bulk mapping sheet aligning old and new codes with updated rates.
• Import the sheet back into your ERP system using the import tool or dedicated modules.

4. Code Edits and Rate Linkage

• Verify the updated codes in respective product/service master records within the ERP.
• Link the new codes with the corresponding GST rates, ensuring automatic calculation during invoicing.

5. Validation and Testing

• Create sample sales and purchase invoices using updated codes.
• Ensure GST rates apply correctly and invoice fields show the new codes.
• Cross-check with your tax consultant or software validations for errors.

Validation Examples: Detecting Misclassification on Sample Invoices

Testing is a crucial step, as errors can cause compliance failure. Here’s how to validate:

• Sample Invoice Review: Issue invoices for top 10-20 frequent SKUs with new HSN codes and rates.
• Check Tax Computation: GST output tax calculations must match statutory rates.
• Cross Reference with GST Returns: Reconcile these invoices with GSTR-1 and GSTR-3B entries for code consistency.
• Identify Errors: Flag any product/service showing mismatched or undefined codes causing GST mismatches during return filing.

Best Practices & Pitfalls to Avoid During Revision

• Version Control: Maintain version logs of code changes to track when and why updates were made.
• Audit Trail: Ensure that system records user changes and approvals for compliance audits.
• Rollback Strategy: Keep backups that allow restoration if major errors surface post-update.
• Vendor Communication: Inform your suppliers and clients about new codes to avoid invoice mismatches.
• Training: Train accounting and sales teams on using updated HSN/SAC codes effectively.

Frequently Asked Questions (FAQs)

How often does the government update HSN/SAC codes?

Updates usually coincide with GST rate revisions or policy reforms, roughly every 2-3 years.

Can I continue using old codes during the transition?

It is recommended to switch as per the notified dates; otherwise, returns may face mismatches.

Is manual updating possible without ERP support?

Possible but not practical for large businesses due to risk of errors and time consumption.

What if some product codes have no direct new equivalent?

Consult the Guidebook and your GST consultant; sometimes reclassification under broader categories is needed.

How to ensure vendor compliance with new codes?

Communicate changes clearly, share updated code lists, and seek their confirmation on invoice coding.

Does SAP, Tally, or other ERP software have built-in updates?

Many ERP vendors release patches or updates to automate this; check with your software provider.

What penalties apply for incorrect HSN/SAC use?

Penalties can include interest on tax differential, notice from tax authorities, and blocked ITC claims.

How to handle multi-branch or multisite ERP data?

Synchronize updates across all sites centrally to avoid regional mismatches.

Will GST audits check HSN/SAC revisions?

Yes, auditors verify classification accuracy and consistency with returns.

Is the Guidebook on Mapping available in regional languages?

Currently, it is primarily in English and Hindi, but official translations may be released.

Curiosity Alert: How Can These Revisions Impact Your Input Tax Credit? Stay tuned for our next tutorial on ITC Treatment under GST 2.0!

Final Thoughts

Updating your HSN and SAC codes post-GST 2.0 is not just a compliance exercise but a strategic step to ensure smooth operations and avoid costly mismatches. Follow meticulous backup, mapping, testing, and communication to sail through this transition confidently. Staying abreast of government notifications and leveraging your ERP capabilities will reduce disruptions and build trust with tax authorities.

“Change is the only constant in taxation; mastering it ensures your business stays ahead.”

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© 2025 The Accounting Expert — All rights reserved.

Author Credit: Powered By TheAccountingExpert Team

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GST Rate Cuts Not Passed On? Authorities Scrutinize FMCG Pricing Gaps in 2025

India’s Fast-Moving Consumer Goods (FMCG) sector, a vital part of the economy, is under regulatory review after GST 2.0 rate cuts. While the government slashed GST rates to ease consumer burden, reports are surfacing that some manufacturers and distributors aren’t fully passing these savings, especially in low-unit packs. This article dives deep into the allegations, reasons, regulatory actions, and how FMCG players can safeguard their brand and compliance.

Background: GST 2.0 Rate Cuts and FMCG Pricing

The GST Council's reform on 22 September 2025 simplified and reduced GST rates on many FMCG essentials, pushing most items into 5% or 18% slabs. This was intended to lower prices transparently for consumers, especially on affordable small-pack products such as snacks, personal care items, and household essentials.

However, soon after, a pattern emerged where some brands and distributors reportedly did not adjust retail prices proportionately, especially on low-unit packs priced around ₹20 or less.

What the Allegations Say: Pricing Gaps and Consumer Impact

• Pricing Gaps: Excessive MRP or base prices remaining same despite GST cuts, eroding the intended consumer benefit.
• Focus on Low-Unit Packs: Small packs like ₹5, ₹10, ₹20 that directly target low-income groups showed minimal price reduction.
• Retail and Ecommerce Discrepancies: Uneven price adjustments between offline and online platforms noted.

Regulatory authorities, including CBIC and state GST wings, are scrutinizing these anomalies under anti-profiteering rules.

Possible Reasons Behind Pricing Gaps

• Older Inventory Stock: Firms may still be selling older stock with pre-cut GST pricing, delaying full pass-through.
• Margin Pressure: Manufacturers absorb GST cuts unevenly to protect profit margins, shifting burden to consumers.
• Rounding-Off Practices: Price rounding or pack size adjustments inadvertently dilute tax benefit reflection.
• System or Compliance Delays: ERP system lag or invoice updating delays affect quick price resets.

Consequences for Non-Compliance

• Penalties and Notices: Authorities may impose penalties and require corrective price adjustments.
• Damage to Brand Reputation: Consumer trust issues arise from perceived price gouging.
• Regulatory Orders: Possible orders to reduce MRP or align prices with GST benefits swiftly.
• Heightened Audits: Increased scrutiny on product pricing, promotions, and supply chain transparency.

What Should FMCG Businesses Do?

• Conduct Price Audits: Regularly audit your product pricing across SKUs and retail platforms.
• Reflect Tax Savings Transparently: Adjust MRP and printed prices to clearly show GST benefit pass-through.
• Align MRP Changes: Coordinate with supply chain partners and distributors for consistent pricing.
• Train Sales & Marketing Teams: Help them communicate GST benefits effectively to retailers and consumers.
• Use Technology Tools: Implement ERP and pricing software upgrades to automate tax rate changes and price updates.

Real-World Insight: Industry Voices

Leading FMCG companies like Hindustan Unilever Limited and Perfetti Van Melle have publicly stated that GST benefits have been fully passed on through a mix of direct price cuts and increased pack sizes to maintain affordability. However, industry insiders recognize logistical challenges especially in rural and small format distribution impacting uniform price adjustments.

Regulatory Outlook and Consumer Protection

The Delhi High Court ruling on 30 September 2025 emphasized that increasing product quantity without adjusting MRP after a GST cut is considered a deceptive practice. This sets a legal precedent ensuring GST rate benefits reach consumers effectively.

Government enforcement is intensifying in 2025-26, with regular market surveillances, price monitoring, and consumer grievance redressal mechanisms enhanced.

Curiosity Section: How Can Small Retailers Cope With Price Changes?

Small retailers often face challenges adapting quickly to new pricing and stock replenishment. Many rely on distributor pricing or face delays in receiving updated invoices. The next section explores practical solutions for them to stay compliant and competitive.

Frequently Asked Questions (FAQs)

• Q1: Why are FMCG companies being scrutinized post GST rate cuts?
  Authorities suspect some brands/distributors are not passing GST benefits to consumers fully, particularly on low-priced packs.
• Q2: What are low-unit packs?
  Small quantity product packs priced typically ₹20 or below targeting affordability.
• Q3: Is it legal to keep MRP same while increasing quantity?
  The Delhi High Court ruled it as deceptive if done without MRP reduction after GST cuts.
• Q4: How can FMCG companies prove compliance?
  By maintaining transparent pricing records, documentation of cost and tax adjustments, and reporting to authorities.
• Q5: What penalties can be imposed?
  Fines, interest on wrong pricing, orders to revise prices, and reputational damage.
• Q6: Can consumers report violations?
  Yes, consumer forums and GST helplines accept complaints against unfair pricing.
• Q7: Why do margins affect price pass-through?
  Companies may delay passing savings to protect profitability in a competitive market.
• Q8: How should distributors manage pricing?
  They should align closely with manufacturers and avoid inflating prices post-GST revisions.
• Q9: Are e-commerce prices also monitored?
  Yes, e-commerce platforms face regulatory scrutiny for consistent GST benefit pass-through.
• Q10: What is best practice for pricing transparency?
  Communicate clear MRP changes, update sales invoices, and educate supply chain stakeholders on GST impact.

Conclusion

The 2025 GST rate cuts brought welcome relief for consumers but exposed friction in pricing practices within the FMCG sector. As authorities clamp down on unfair gaps, companies must proactively audit, document, and transparently pass on tax benefits. This is not only a compliance necessity but a trust-building opportunity with a price-sensitive Indian consumer base.

Motivational Quote:
“Fair pricing today builds lifelong consumer trust and stronger brands tomorrow.”

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Author Credit: Powered By TheAccountingExpert Team

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Software Migration for GST 2.0: Bulk Update Products, Rates & ERP Mapping (After 22 Sept 2025)

With the GST rate changes effective from 22 September 2025, businesses, especially MSMEs, face a pressing challenge: quickly updating tax rates, product masters, ledgers, and mappings in their ERP or accounting software. This hands-on tutorial unpacks the entire migration—from preparation to validation—helping you upgrade smoothly, avoid errors, and stay compliant.

Why Timely Migration Matters

GST 2.0 simplifies tax slabs to mainly 5% and 18%, replacing multiple complex rates. However, this reform requires businesses to rapidly map new tax rates to thousands of SKUs and update ledgers across their accounting and ERP systems. Failure to do so can cause incorrect invoicing, GST return mismatches, and penalties.

Pre-Migration Checklist: Preparing for a Smooth Transition

• Backup Data: Take a full backup of your accounting files (Tally, ERP, inventory databases) to enable rollback if needed.
• Review Old vs New Rates: Prepare a detailed list of SKUs and their old GST rates alongside the new applicable rates post-22 September 2025.
• Identify Affected SKUs: Filter out products that require rate updates (often processed foods, garments, construction, etc.) and classify by HSN codes.
• Map SKU to Ledger Groups: Document existing ledger group mappings and plan updates for tax ledgers aligned with new GST 2.0 rules.
• Inform Your Team: Ensure your accounting, billing, and inventory teams are aware of the migration schedule and tasks.

Step-by-Step Migration in Popular Software: TallyPrime Example

Step 1: Access the GST Rate Setup Utility

Open TallyPrime and press Alt + G or navigate to Go To > GST Rate Setup. This utility lets you view and bulk update GST rates.

Step 2: Select Items for Bulk Update

Use filters like HSN code, stock group, or ledger group to list all items requiring new GST rates. TallyPrime shows the old GST rate alongside the new rate option.

Step 3: Update New GST Rates

Select the affected items and assign the new GST rate (5% or 18%) from the dropdown. Apply changes in bulk to save time and prevent manual errors.

Step 4: Update Ledger Groups and Tax Ledgers

Similarly, update GST ledgers mapped to these products to reflect correct tax collections. For instance, IGST, CGST, and SGST ledgers need revision for compliance with GST 2.0.

Step 5: Save and Sync Data

Save the changes and synchronize with your billing and invoicing modules to apply new tax rates going forward.

Validation Post-Migration: Ensuring Accuracy

• Test Sample Invoices: Generate invoices for products with updated GST rates and verify tax calculation correctness.
• Check Input Tax Credit (ITC) Entries: Reconcile ITC claims in your GST returns with the updated rates.
• Audit Stock & Transactions: Spot-check your inventory and sales records for mismatches.
• GST Return Filing Simulation: Run mock GST return filings to detect errors or warnings.

Rollback Plan & Error Handling

Despite planning, issues may arise. Keep your pre-migration backup ready for restoration if you encounter:

• Incorrect tax rates causing invoice errors
• Mismatch errors in GST returns
• Discrepancies reported during audits

Quickly rollback to the backup version, identify root causes, then carefully reapply migration steps with corrections.

Best Practices for GST 2.0 Migration

• Maintain Documentation: Record every migration step, changes made, and versioning details for compliance audits.
• Keep Audit Trail: Use ERP features to track changes and approvals.
• Train Staff: Update teams on new GST processes to prevent billing errors.
• Communicate with Tax Consultants: Seek expert advice for complex scenarios.

Curiosity Section: What Happens If We Miss the GST Update Deadline?

Missing the transition deadline can lead to incorrect tax calculations, failed returns, and penalties. It could also delay input credit claims and disrupt business cash flows. Next, understand how to mitigate these risks with timely checks and backups.

Frequently Asked Questions (FAQs)

• Q1: Why is GST migration necessary post 22 Sept 2025?
  The GST Council consolidated multiple rates mainly into 5% and 18%, so software updates are required to reflect these new slabs correctly.
• Q2: Can I bulk update GST rates in Tally or ERP?
  Yes, TallyPrime offers a GST Rate Setup utility for bulk updates. Many ERP systems also support batch updates.
• Q3: What are the risks of not migrating correctly?
  Incorrect invoicing, GST return mismatches, blocking of ITC claims, and potential penalties.
• Q4: How to validate after GST migration?
  Generate test invoices, reconcile GST returns, and audit sample transactions.
• Q5: What if errors are found after migration?
  Use your backup to roll back and reapply corrections.
• Q6: Does migration affect stock and opening balances?
  Generally, rate changes do not alter stock quantities or values but may affect tax calculations on sales/purchases.
• Q7: Should I update GST ledgers along with product rates?
  Yes, ensure tax ledger groups match new GST rate rules for proper filing.
• Q8: How can MSMEs handle this migration with limited tech skills?
  Consult your software vendor or hire a professional for guided bulk updates.
• Q9: What documentation is required during migration?
  Keep backup copies, change logs, and screenshots of updated masters.
• Q10: How often should I back up my data during migration?
  Before starting and immediately after completing major update steps.

Conclusion

GST 2.0 migration poses challenges but also opportunities to streamline tax compliance. By preparing carefully, using bulk update tools like TallyPrime's GST Rate Setup, validating your data, and keeping a rollback plan, businesses can transition smoothly while minimizing risks.

Stay diligent, plan ahead, and treat migration as a strategic compliance project to keep your business GST-ready amid the 2025 reforms.

Motivational Quote:
“Adaptability in compliance today ensures your business thrives tomorrow.”

Empowering Indians with Tax & Accounting Knowledge that Matters

© 2025 The Accounting Expert — All rights reserved.

Author Credit: Powered By TheAccountingExpert Team

The Accounting Expert: Master Tax, Audit & Finance — Without Being a CA

How to Use the Revised Refund Rule (Rule 91(2) CGST) to Claim 90% Provisional Refunds: Step-by-Step Guide

Are you a GST taxpayer waiting for refunds? The recent amendment to Rule 91(2) CGST now allows taxpayers to claim 90% provisional refunds based on system-driven risk assessment. This tutorial will take you through a simple, detailed, and practical step-by-step process to help you understand and avail this revised mechanism confidently.

Why the Revised Rule 91(2) CGST Matters Now

In the 56th GST Council meeting, a significant amendment was recommended to Rule 91(2) of the CGST Rules. This rule governs the granting of provisional refunds under GST. The key update now mandates proper officers to sanction 90% of the claimed refund amount provisionally after a system-based risk evaluation, speeding up the refund process substantially. This is a win-win for many businesses struggling with lengthy refund wait times.

Understanding the Existing Rule 91(2) Versus the Revised Provision

Previously, provisional refunds were given based on officer discretion and often delayed due to manual processes and audits. The new provision mandates a system-based approach that automatically assesses refund applications for risk, ensuring fast-track processing for low-risk claims.

The key points:

• Refund orders (Form RFD-04) to be issued within 7 days of acknowledgment.
• Provisional refund amount sanctioned is up to 90% of the claim.
• Risk evaluation is automated by the GST system to identify low-risk claims.
• Effective from 1 October 2025 for all types of refund claims.

When Does Your Refund Claim Qualify for 90% Provisional Grant?

The new procedure uses a sophisticated risk evaluation logic driven by the GST portal’s backend system that scores each refund claim. Qualifying criteria include:

• Complete and accurate refund application submission.
• Compliance with GST returns filing and payment history.
• Low-risk profile based on past audit and document verification.
• No significant mismatch or anomaly in the data filed (invoice, ITC claims, turnover).

If your claim meets these parameters, the system will flag it as low risk and push it for provisional refund sanctioning.

Example of Risk Evaluation:

A business consistently filing GST returns on time, with proper documentation and no past audit objections, files a refund for excess input tax credit. The system identifies no red flags in data compliance and assigns a low-risk score, thereby enabling automatic 90% provisional refund sanction pending final verification.

Step-by-Step Guide to Claiming Your 90% Provisional Refund

Step 1: Filing the Refund Application

• Login to your GST portal account.
• Navigate to ‘Services’ > ‘Refunds’ > ‘Application for Refund’.
• Fill Form GST RFD-01 with accurate data including reason and period of refund.
• Attach necessary supporting documents like invoices, debit/credit notes, export documents, etc.
• Submit the application with proper verification.

Step 2: System-Based Risk Evaluation

• The refund claim is automatically analyzed by the GST system using risk parameters.
• If flagged low-risk, your claim qualifies for 90% provisional refund.

Step 3: Provisional Refund Sanctioning

• The proper officer issues Form RFD-04 sanctioning refund order within 7 days of application acknowledgment.
• 90% of the claim amount is disbursed provisionally.

Step 4: Final Verification and Settlement

• Post sanctioning, GST officers may conduct document verification or audit.
• Based on verification, the balance refund amount (remaining 10%) is processed.
• If anomalies are found, there may be rejection or demand notices, upon which appeals can be filed.

Real-Life Scenario

Rajesh, a textile exporter in Surat, filed for a refund of excess IGST paid on exports. His account was compliant with no past discrepancies. After submitting his claim electronically on 2nd October 2025, the GST system evaluated his risk score. Within 7 days, Rajesh received 90% of his refund amount provisionally credited in his bank account. Later, after document verification, the final balance was settled, with no audit objections in his case.

Precautions and Things to Keep in Mind

• Documentation: Always maintain authentic invoices, export bills, payment proofs, and correspondence to support your refund claim.
• Audit Risks: Provisional refund does not guarantee final settlement; GST authorities retain the right to audit and demand adjustments.
• Appeals: If your claim is rejected, a clear procedure for revision and appeals is available under Section 107 and related rules.
• Update on prohibitions: Certain goods, such as tobacco and essential oils, may have restrictions on provisional refunds.

What’s Next? The Future of Faster Refunds

This rule amendment marks a transformative shift towards automation and faster liquidity for taxpayers. With more businesses expected to benefit, staying updated and compliant is crucial for smooth reimbursement.

Wondering how to handle situations when your claim is flagged high-risk? Keep reading for expert tips on documentation and appeal strategies!

Frequently Asked Questions (FAQs)

• Q1: What is Rule 91(2) CGST about?
  It governs the granting of provisional GST refunds, now amended to allow 90% provisional sanction based on system risk evaluation.
• Q2: How quickly will I get the provisional refund?
  The rule mandates issuance of the refund order within 7 days of claim acknowledgment if criteria are met.
• Q3: Can provisional refund be rejected?
  Yes, if post-verification anomalies are found, provisional refunds can be adjusted or reversed.
• Q4: What documents are needed for refund claim?
  Invoices, proof of payment, export documents, debit/credit notes, and bank statements typically.
• Q5: Can I appeal if my refund claim is rejected?
  Yes, appeals can be filed under GST procedures with appropriate forms.
• Q6: Are all taxpayers eligible for 90% provisional refunds?
  Only claims flagged low-risk by the system qualify for this facility.
• Q7: What if my provisional refund is delayed?
  You can raise a grievance with GST helpline or approach the refund sanctioning officer.
• Q8: Does this rule apply to both CGST and IGST refunds?
  Yes, refunds under CGST, SGST, and IGST are covered under this rule.
• Q9: Are there goods excluded from provisional refunds?
  Certain categories like tobacco have restrictions as per notifications.
• Q10: How does the system risk evaluation work?
  The GST portal uses automated algorithms analyzing filing history, document matching, and past audits.

Conclusion

The revised Rule 91(2) CGST empowers taxpayers with quicker refunds, easing cash flow substantially. By understanding the criteria, following proper filing steps, and maintaining sufficient documentation, businesses can leverage this system for fast refunds. Remember, provisional refund is an initial step; always prepare for documentation scrutiny and possible appeals if needed.

Stay alert, comply fully, and use this knowledge to bolster your business’s GST processes for a smoother financial ride ahead.

Motivational Quote:
“Financial clarity and compliance open the doors to business growth and trust.”

Empowering Indians with Tax & Accounting Knowledge that Matters

© 2025 The Accounting Expert — All rights reserved.

Author Credit: Powered By TheAccountingExpert Team

The Accounting Expert: Master Tax, Audit & Finance — Without Being a CA

Punjab OTS Scheme 2025: How to Settle Legacy Tax Dues & Benefit from Waivers

Punjab OTS 2025 Scheme Goes Live: Legacy Dues Settlement, Who Benefits & How to Apply

Are you a business owner in Punjab struggling with outstanding legacy tax dues from pre-GST periods? The Punjab government has launched a One-Time Settlement (OTS) Scheme in 2025 targeting resolution of such legacy liabilities under various pre-GST statutes. Running from 1 October to 31 December 2025, this groundbreaking scheme offers waivers on interest and penalty, helping thousands breathe easy and clear their old tax arrears.

What is the Punjab OTS Scheme 2025?

The Punjab OTS Scheme 2025 is an initiative by the state government to allow taxpayers and businesses to settle pending and disputed tax dues originating from legacy laws like Sales Tax, VAT, and other pre-GST Acts. It prioritizes speedy resolution, easing compliance burdens on taxpayers while providing robust revenue recovery for the government.

Key Features of the Scheme

• Timeline: Open from 1 October 2025 to 31 December 2025
• Scope: Tax liabilities pending under Sales Tax, VAT, Entry Tax, etc., before GST introduction
• Benefits: Waiver of up to 100% interest and 75%-90% penalty on eligible dues
• Eligibility: Businesses with outstanding tax, interest, penalty dues under pre-GST laws as verified by the department
• Procedure: Simple application and payment steps with online and offline options

Who Benefits Most from the Punjab OTS Scheme 2025?

1. MSMEs and Small Businesses

Micro, Small and Medium Enterprises typically face cash flow constraints and struggle to clear legacy tax dues due to accumulating interest and penalties. This OTS scheme offers them relief by substantially reducing their total payable amount, enabling fresh starts and sustainable business growth.

2. Traders & Distributors

Entities dealing with sales tax/VAT arrears, especially in sectors like wholesale trade, manufacturing supply chains, and retail distribution, stand to benefit from simplified dues clearance with minimal additional financial burden.

3. Sectors with Long-Pending Litigations

Businesses caught in lengthy tax litigations over pre-GST dues can opt for this scheme to avoid continuing legal costs and uncertainty, swiftly settling their dues through upfront payment.

4. New Businesses with Legacy Liabilities from Transfer

New owners who inherited legacy tax dues from acquisitions can use this window to clear old obligations and start with a clean slate under the current GST framework.

How to Prepare and Apply for the Punjab OTS Scheme 2025

Step 1: Identify Your Legacy Dues

• Request your account statement from the Punjab Commercial Taxes Department.
• Verify outstanding tax, interest, and penalty amounts under legacy laws.
• Consult your accountant or tax advisor to cross-check dues.

Step 2: Check Eligibility

• Confirm that dues fall under covered pre-GST Acts.
• Ensure no ongoing criminal proceedings connected to dues (which may disqualify).
• Prepare necessary identity and business registration documents for proof.

Step 3: Calculate Settlement Amount

• The scheme waives 100% interest but only part of penalty — usually 75% to 90%, varying by category.
• Example: if your principal tax is INR 1,00,000; penalty INR 20,000; interest INR 30,000
• Settlement = 1,00,000 (tax) + 5,000 (25% penalty balance) + 0 (interest waived) = INR 1,05,000

Step 4: Submit Application

• Fill the prescribed OTS application form available on official Punjab Commercial Taxes website or at department offices.
• Attach necessary documents like demand notices, proof of business registration, identity proofs.
• Submit online or offline before 31 December 2025.

Step 5: Pay Settled Amount

• After application approval, pay the amount through online payment gateway or offline as directed.
• Obtain acknowledgment or clearance certificate from the department.

Step 6: Retain Documents

Keep all receipts, acknowledgments, and correspondence as proof of settlement in case of future inquiries.

Watch-Outs: Caution Points to Note

• No Reversal After Settlement: Once settled, dues under the scheme cannot be reopened or litigated further.
• Timely Application: Missing the deadline means losing the benefit and facing full recovery actions.
• Eligibility Verification: Confirm no disqualifying proceedings exist before applying.
• Partial Waivers: Penalty waivers vary; understand your category to estimate exact payable.
• Documentation Accuracy: Provide accurate and genuine documentation to avoid rejection.

Implications of Punjab OTS 2025 on Compliance Behavior

This scheme is a clear signal encouraging taxpayers to resolve legacy issues and move towards cleaner compliance under GST. It also sets a precedent for other states to announce similar schemes addressing their pre-GST dues backlog. Early adoption promotes better business trust and smooth regulatory relationships.

Businesses clearing legacy dues now can focus on future growth rather than being burdened by past liabilities.

Curious: How Will Your Business Benefit Financially? Keep Reading for a Real Example!

Example: A Textiles Manufacturer’s Savings Through OTS

"Punjab Textiles Ltd." had legacy VAT and sales tax dues of INR 15 lakhs, including INR 5 lakhs interest and INR 3 lakhs penalty. Under the OTS:

• Interest waiver = INR 5 lakhs saved
• Penalty waiver = 75% of INR 3 lakhs = INR 2.25 lakhs saved
• Total savings = INR 7.25 lakhs
• Payable now = INR 7.75 lakhs instead of full INR 15 lakhs

This allowed the company to free up working capital and invest in modernization instead of legal battles.

Final Thoughts

The Punjab OTS Scheme 2025 presents a golden opportunity to resolve long-standing tax dues painlessly and move forward with renewed confidence. Businesses should act fast, prepare documentation diligently, and seek expert advice if needed. Resolving legacy tax dues today paves the way for clean compliance and business growth tomorrow.

"Clearing past burdens is the foundation for building a prosperous future."

Empowering Indians with Tax & Accounting Knowledge that Matters

© 2025 The Accounting Expert — All rights reserved.

Author Credit: Powered By TheAccountingExpert Team

The Accounting Expert: Master Tax, Audit & Finance — Without Being a CA

FAQs on Punjab OTS Scheme 2025

• Q1: What types of tax dues qualify for Punjab OTS 2025? Dues under pre-GST Acts like Sales Tax, VAT, and Entry Tax before 2017.
• Q2: Can I apply if my dues are under GST? No, this scheme only covers legacy, pre-GST dues.
• Q3: Is interest fully waived under the scheme? Yes, 100% interest waiver is granted on eligible outstanding amounts.
• Q4: How much penalty waiver is offered? Penalty waiver ranges between 75% to 90%, depending on business category.
• Q5: What is the last date to apply? Applications must be submitted before 31 December 2025.
• Q6: What documents are needed to apply? Demand notices, business registration proof, identity documents, and payment proofs.
• Q7: Can I pay dues in installments under the scheme? The scheme generally requires full payment or as prescribed in application guidelines.
• Q8: Are pending litigations disqualifying? Criminal proceedings or certain legal cases may disqualify applicants.
• Q9: Will payment under OTS stop government recovery actions? Yes, once dues are cleared under OTS, no further recovery actions apply.
• Q10: Will this scheme impact my future GST compliance? Positively. It clears past dues allowing focused compliance under GST.

Complete 2025 Guide: How to Fill Invoice-Level Details in GSTR-7 & GSTR-8 (New Formats)

Enhanced GSTR-7 & GSTR-8 Formats: How to Fill Invoice-Level Details Correctly (2025 Guide)

New GST return formats are here! From 11 February 2025, the government has revamped the GSTR-7 (for TDS deductors) and GSTR-8 (for e-commerce operators collecting TCS) formats requiring detailed invoice-level data submission. If you’re a TDS deductor, e-commerce operator, or accounting professional, understanding these changes is essential to avoid rejection, penalties, and reconciliation nightmares.

Why the Change? Understanding the Need for Invoice-Level Details

The GST Council introduced invoice-level reporting to tighten compliance and enable precise tracking of transactions, allowing better reconciliation between deductors/collectors and suppliers. Earlier, summary-level data led to mismatches, delayed credit claims, and audit issues. The new formats aim for transparency, faster matching with supplier invoices, and reducing tax leakage.

What’s New: Comparison Between Old and New GSTR-7 & GSTR-8 Formats

Aspect	Old Format (Before Feb 2025)	New Format (From Feb 2025)
Data Level	Summary-based TDS/TCS details	Invoice-wise mandatory details
Invoice Details Required	No detailed invoice breakup	Invoice date, invoice number, GSTIN of supplier, taxable value, tax amount
Fields Added	Limited to TDS/TCS amount	Place of supply, reverse charge if applicable, rate-wise breakup
Reconciliation	Difficult due to aggregate data	Easier due to granular data matching
Common Issues	Frequent mismatches and credit rejections	Errors if invoice data incomplete or incorrect

Step-by-Step Tutorial: Filling Invoice-Level Details in GSTR-7

GSTR-7 is the TDS return filed by deductors who deduct tax at source under GST. Here's how to fill the invoice-level details in the new 2025 format:

Step 1: Gather Your Source Documents

• Invoice copies where GST TDS is deductible
• Tax deduction challans and records
• Supplier GSTIN details

Step 2: Login to GST Portal and Access GSTR-7

• Navigate to the Returns Dashboard
• Select the relevant period
• Choose the new GSTR-7 format

Step 3: Begin Invoice-Level Entry

• Enter invoice number and invoice date exactly as per supplier invoice
• Fill supplier’s GSTIN carefully (wrong GSTIN causes mismatch)
• Add taxable value, segregated if multiple items or tax rates apply
• Specify place of supply and mention if reverse charge mechanism (RCM) applies
• Enter tax deducted amount (TDS) at applicable rate

Step 4: Validate & Submit

• Use the portal’s validation tools to check for missing or inconsistent data
• Cross-check totals with your TDS payment challans
• Submit and download acknowledgment with ARN

Step-by-Step Tutorial: Filing Invoice-Level Details in GSTR-8

GSTR-8 is filed by E-Commerce Operators (ECOs) who collect TCS under GST. It also demands invoice-level entries in the new format.

Step 1: Collate Buyer-wise Invoice Details

• Invoices issued on the ecommerce portal to consumers
• Include invoice number, date, GSTIN of supplier (seller on marketplace)
• Taxable value and applicable GST rates

Step 2: Login to GST Portal & Select GSTR-8 for Filing

Step 3: Fill Invoice-Level Data

• Enter individual invoice details as received from sellers
• Input tax collected at source (TCS) amount correctly
• Provide location of supply details

Step 4: Validate, Cross-Check & Submit

• Look out for validation errors related to GSTIN format, duplicate invoices or mismatch of tax amounts
• Submit once reconciled with seller returns

Real-Life Examples

Example for GSTR-7

Suppose "XYZ Ltd" is a TDS deductor who deducted tax on multiple invoices during the month of March 2025:

• Invoice 1 from Supplier A: No. INV123, Date 05-03-2025, taxable value INR 50,000, GSTIN 27ABCDE1234F1Z5, TDS deducted INR 1,800
• Invoice 2 from Supplier B: No. INV456, Date 15-03-2025, taxable value INR 30,000, GSTIN 27XYZDE7890G2Z7, TDS deducted INR 1,080

In GSTR-7, these two invoices must be entered separately with exact details including GSTINs, invoice numbers, dates, taxable values, and TDS amounts.

Example for GSTR-8

“E-Com Pvt. Ltd.” operates an ecommerce portal collecting TCS on sales made by sellers.

• Invoice INV890, Date 08-03-2025, Seller GSTIN: 29PQRSX5678T1Z2, Taxable value INR 1,00,000, TCS collected INR 2,500
• Invoice INV891, Date 20-03-2025, Seller GSTIN: 29ABCDX1234T1Z8, Taxable value INR 60,000, TCS collected INR 1,500

Each invoice detail needs to be captured portally in GSTR-8 for accurate tax collection and reconciliation.

Common Errors & How to Avoid Them

• Incorrect GSTIN of Supplier/Seller: Always validate GSTIN before entry to avoid rejections.
• Mismatch in Invoice Date & Number: Ensure data matches supplier invoices exactly.
• Duplicated Invoices: Avoid entering the same invoice twice in a return.
• Wrong Taxable Values or TDS/TCS Amounts: Cross-check computations carefully.
• Missing Mandatory Fields like Place of Supply: Do not skip any mandatory field to prevent errors.

Reconciliation Tips Between Supplier Returns and Your GSTR-7/GSTR-8

Strict reconciliation ensures that credits are claimed properly and disputes minimized.

• Match invoice details reported in your GSTR-7 with supplier’s GSTR-1 or GSTR-3B.
• For GSTR-8, reconcile seller-wise invoice data reported with TCS deducted.
• Resolve mismatches early via supplier coordination.
• Maintain excel or accounting software records for smoother filing.

What Happens If You Don’t Comply?

Non-compliance or errors in invoice-level details can lead to:

• Rejection of returns
• Delayed ITC credits
• GST notices or penalties
• Long audit or assessment procedures

Summary & Next Steps

The enhanced GSTR-7 and GSTR-8 formats bring more responsibility to taxpayers and e-commerce operators, demanding precise invoice-wise entries. Following the detailed steps, avoiding common errors, and reconciling consistently will help you streamline GST TDS/TCS filing.

Master these new formats today to keep your GST compliance on track and maintain smooth business operations.

"Accuracy in reporting is the strongest shield against compliance risks."

Empowering Indians with Tax & Accounting Knowledge that Matters

© 2025 The Accounting Expert — All rights reserved.

Author Credit: Powered By TheAccountingExpert Team

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FAQs on Filing Invoice-Level Details in GSTR-7 & GSTR-8 (2025)

• Q1: Why was invoice-level detail introduced in GSTR-7 and GSTR-8? To improve transparency, reconciliation, and prevent mismatches in TDS/TCS reporting.
• Q2: Can I file GSTR-7 without invoice-level details? No, invoice-wise details are mandatory from 11 Feb 2025.
• Q3: What common errors should I avoid when entering GSTIN? Always use correct 15-digit GSTIN; wrong or incomplete GSTIN leads to rejection.
• Q4: How do I reconcile GSTR-7 with supplier returns? Match invoice numbers, GSTINs, taxable values, and TDS amounts with supplier’s GSTR-1 and GSTR-3B.
• Q5: What if I find duplicated invoices in my data? Remove duplicates before filing to avoid rejection and penalties.
• Q6: Can I edit GSTR-7 or GSTR-8 after filing? Amendments are allowed through subsequent returns or correction procedures but should be minimized.
• Q7: What documents support invoice-level filing? Maintain copies of invoices, TDS/TCS challans, and supplier communications.
• Q8: Are there penalties for incorrect filing? Yes, data discrepancies or non-filing attract penalties under GST law.
• Q9: How do I handle reverse charge invoices in GSTR-7 or 8? Report separately with specific mention of RCM applicability.
• Q10: Which software tools support the new formats? Many GST software providers have upgraded to support invoice-level filing; verify with your provider.

Deep Dive into CGST Rule 164 Amendments 2025: Refunds & Demand Adjustments Simplified

Deep Dive into CGST Rule 164 Amendments 2025: Refunds & Demand Adjustments Explained

Are you a taxpayer or business owner struggling with overlapping GST refund claims and demand notices? The recent amendments to CGST Rule 164 in 2025 have introduced critical changes that impact refund eligibility when demand notices overlap with refund periods. This tutorial explains these amendments clearly, empowers you to navigate the complexities, and ensures your refund claims and appeals are strong and compliant.

Understanding the CGST Rule 164 Amendments 2025

In 2025, the Central Government introduced an important amendment in the CGST (Second Amendment) Rules, 2025, specifically inserting an explanation in Rule 164. Sub-rule (4) was modified to clarify that no refund shall be available for certain demands if the tax, interest, and penalties have been discharged for the period, particularly when the demand partially covers the 'period mentioned' in the refund notice.

Key amendment highlights:

• Rule 164(4) clarified and expanded.
• New Explanation inserted defining scenarios where refunds get blocked.
• Refunds claimed over periods overlapping with demands may be disallowed.

This amendment aims to streamline refund processing and prevent double benefit claims.

Why Does This Matter for Your Business?

Many businesses file refunds covering multiple tax periods, while GST authorities issue demand notices for some of those periods. Before the amendment, ambiguity existed whether refunds should be blocked if part of the claimed refund period was under a demand notice. Now, income tax officers can reject refunds overlapping with demand periods if tax, interest, and penalty have already been paid.

This creates a risk of blocked refunds or disputes if you do not carefully document and assess claims under the new rule.

Scenarios Where Rule 164 Amendments Apply

• Refund claim period partially overlapping a demand notice period.
• Tax, interest, or penalty paid for the demand period.
• Receipt of a show-cause notice or demand notice for earlier tax periods.
• Business claiming refunds for the unutilized input tax credit (ITC) or excess payments.

Worked Example: When Refund May Get Blocked

Consider the business "ABC Ltd." which filed a refund for April-June 2024. The GST officer later issues a demand notice for May 2024 for tax and penalty for INR 1,00,000, which ABC Ltd. has paid in full.

• Refund claim period: April-June 2024
• Demand notice period: May 2024
• Tax, interest, penalties paid for May 2024 demand

Analysis: As the demand covers May 2024 which falls within the refund claim period, and tax, penalty paid for this period, per Rule 164(4) Explanation, no refund is available for May 2024 amount in the refund claim. Essentially, the refund for May’s overlapping amount is blocked.

Calculating Refund Blocked Amount

If the refund claim was for INR 3,00,000 (covering input tax credits of three months equally), the portion for May would be INR 1,00,000 and blocked.

• Refund claimed = INR 3,00,000
• Demand paid portion (May 2024) = INR 1,00,000
• Refund allowed = INR 2,00,000

How to Document, Prepare for Appeals & Adjust Returns

Documentation Tips

• Maintain clear records of demand notices and payment receipts of tax, interest, and penalties.
• Document refund claims with clear segregation of periods.
• Retain communication or notices from GST authorities referring to involved periods.

Preparing for Appeals

• If refund is rejected due to Rule 164 amendments, carefully review the notice and exact overlapping periods.
• Gather supporting documents showcasing partial payment, non-overlapping periods if any.
• Consult GST legal experts to file appeals with correct arguments on disputed periods.
• Use Circulars or FAQs released by GST Council that interpret this clause.

Adjusting Accounting and Return Filing

• Adjust your GST returns and input tax credit claims by excluding blocked refund amounts.
• Ensure your accounting records reflect the demand payments and reduced refund claims.
• Consider timing of refund claims in future filings to avoid overlapping periods with demands.

Curious: How Will This Impact Your Monthly Compliance? (Keep Reading!)

Understanding Rule 164’s amendments can redefine your GST refund strategy and audit preparedness. Not accounting for these changes might result in blocked fund flows and disputes. In the next section, we’ll explore strategies to proactively manage refunds and demands for smooth compliance.

Final Thoughts

The CGST Rule 164 amendments of 2025 are technically challenging but essential for businesses to understand. By mastering the new refund blocking rule, taxpayers can avoid pitfalls and build stronger cases for legitimate refunds. Timely documentation, impeccable records, and clear period segregation will be your best allies.

Remember, understanding the nuances today prevents costly disputes tomorrow.

"Tax compliance is not just about rules; it’s about understanding and mastering your financial freedom."

Empowering Indians with Tax & Accounting Knowledge that Matters

© 2025 The Accounting Expert — All rights reserved.

Author Credit: Powered By TheAccountingExpert Team

The Accounting Expert: Master Tax, Audit & Finance — Without Being a CA

FAQs on CGST Rule 164 Amendments 2025

• Q1: What exactly is the Explanation added to Rule 164? It states refunds will be denied for the portion of refund claim overlapping demand periods where tax, interest, and penalties are paid.
• Q2: Can partial refunds for non-overlapping months still be claimed? Yes, refunds covering non-overlapping periods may be granted.
• Q3: What if I disagree with demand notice overlaps? You can appeal with relevant documents and challenge the blocking of refunds.
• Q4: Does the amendment affect only refund claims or other GST processes? Primarily refunds related to demands under Rule 164 are affected.
• Q5: How should I calculate refund amounts disallowed? Segment refund claims by period, allocate amounts proportionally, and exclude the overlapping demand period.
• Q6: Does paying the demand amount automatically block the refund? Yes, payment confirms the demand and blocks refund for that period.
• Q7: Can I claim interest on delayed refund portion? Interest is not payable on the disallowed refund part per the amended rule.
• Q8: What documents should I keep to avoid disputes? Demand notices, payment proofs, refund claim details, and GST return copies are essential.
• Q9: Is there any government guidance on this amendment? GST Council FAQs and Circulars provide clarifications post this amendment.
• Q10: How soon should businesses adapt their refund procedures? Immediately, to avoid blocked refunds and appeal hassles.

GST 2.0 & Healthcare: Impact of 0% GST on Essential Drugs & Medical Devices Explained

GST 2.0 & Healthcare: 0% Tax on Essential Drugs & Its Impact

The GST 2.0 reforms effective from September 22, 2025, have introduced landmark changes for the healthcare sector, especially with the zero percent (0%) GST rate on several essential and life-saving drugs, as well as medical devices. This shift significantly benefits patients by reducing costs while challenging businesses in pharma and healthcare to adapt their billing and compliance frameworks. In this tutorial, you will gain a clear understanding of which drugs and devices are exempted, the reasons behind these changes, and the practical impact on hospitals, pharmacies, and medical device manufacturers.

What You’ll Learn

• Comprehensive list of essential drugs and medical devices now exempt from GST
• Rationale for introducing a 0% GST rate on life-saving medicines
• How hospitals, pharmacies, and patients benefit from this reform
• Key compliance, billing, and margin planning changes pharma and device businesses must implement
• Risks involved including documentation and correct classification to avoid GST penalties

Let’s first explore the list of drugs and devices now enjoying the 0% GST status.

Essential Drugs & Medical Devices with 0% GST in GST 2.0

The GST Council has exempted a wide range of therapeutically critical items under the new healthcare regime. This was done to improve accessibility and affordability, particularly for patients with cancer, chronic ailments, and other life-threatening conditions.

List of Key Drugs Exempted

• Anti-cancer drugs such as Methotrexate, Tamoxifen, Cyclophosphamide
• Insulin and diabetes management medications
• Anti-retroviral drugs used in HIV/AIDS treatment
• Drugs treating cardiovascular diseases like Beta-blockers, ACE inhibitors
• Vaccines critical for public health emergencies

Exempt Medical Devices

• Dialysis machines and consumables
• Heart pacemakers
• Orthopedic implants including stents
• Diabetic testing kits and glucometers
• Catheters and surgical instruments used in chronic treatments

This comprehensive list guides healthcare providers and businesses on what qualifies for 0% GST benefits.

Why 0% GST on These Drugs & Devices?

The primary rationale behind exempting these items includes:

• Reducing Out-of-Pocket Expenses: Healthcare costs are a major burden for Indian families. Zero GST lowers the final price.
• Improving Access: Patients with chronic/critical illnesses get affordable medicines and devices—lifesaving treatments become more accessible.
• Aligning Taxation with Social Priorities: The government seeks to promote public health by ensuring taxation does not hamper essential drug availability.

Impact on Hospitals, Pharmacies & Patients

The zero GST on essential drugs and medical devices affects the ecosystem in multiple ways:

For Hospitals and Healthcare Providers

• Reduced input costs for medicines and devices used in treatments.
• Lower overall treatment costs help improve patient satisfaction and outcomes.
• Need to update billing systems to correctly apply 0% GST on eligible drugs to avoid errors.
• Enhanced compliance obligations to rigorously document and justify the exemption claimed.

For Pharmacies

• Pharmacies must accurately classify drugs on bills and stock records to reflect the new GST rates.
• Margin planning may shift due to the zero GST, affecting pricing strategies.
• Documentation for exemptions must be thorough to withstand GST audits.

For Patients

• Direct benefit in lowered drug prices, especially for lifelong medications.
• Improved affordability can lead to better adherence to prescribed medication regimes.
• Expanded access to advanced medical devices previously burdened by higher tax.

How Pharma & Medical Device Businesses Must Adapt

This reform necessitates clear changes in operational and accounting practices:

Billing and Invoice Adjustments

• Update GST rates in billing software to zero for eligible drugs and devices.
• Mark invoices clearly with exemption codes as prescribed by GST rules.
• Train billing staff to recognize eligible items to prevent credit or tax calculation errors.

Compliance and Documentation

• Maintain detailed records of exempt drugs stocked and sold.
• Collect and verify supplier invoices that reflect 0% GST rate accurately.
• Prepare for periodic GST audits with proper classification proofs and exemption claims.

Margin Planning and Pricing Strategy

• Recalculate profit margins to incorporate reduced tax outgo.
• Consider competitive pricing adjustments to attract more customers.
• Coordinate with suppliers on GST changes to streamline input credit on non-exempted items.

Risks & Caveats: Documentation & Classification

While zero GST benefits are substantial, businesses must avoid risks linked to:

• Incorrect Classification: Misclassifying a taxable drug as exempt can trigger penalties.
• Poor Documentation: Inadequate records may lead to disallowance of ITC or GST demand notices.
• Inconsistent Billing: Errors in invoices may complicate reconciliation and audits.

Curiosity-Driven Section: How Will Zero GST on Life-Saving Drugs Transform Healthcare Every Day?

Imagine a cancer patient who previously struggled with high medication costs now getting cheaper drugs due to GST exemptions. The ripple effect goes beyond finances, influencing health outcomes and quality of life. Stay connected to explore more GST 2.0 insights tailored for businesses and taxpayers alike.

FAQs on GST 2.0 Healthcare 0% Tax Reforms

1. Which drugs are covered under the 0% GST exemption?
   Essential anti-cancer drugs, insulin, anti-retrovirals, cardiovascular medicines, and vaccines are key inclusions.
2. Are all medical devices exempt from GST now?
   No, only essential devices such as dialysis machines, pacemakers, glucometers, and orthopedic implants are exempt.
3. How should pharmacies update their billing system?
   Update item master data with new GST rates and exemption codes for essential drugs and devices.
4. Can hospitals claim ITC on drugs sold at 0% GST?
   ITC claims are generally not applicable on exempt supplies; careful segregation of taxable and exempt items is needed.
5. What documentation is required to prove GST exemption eligibility?
   Maintain bills of supply, manufacturer certificates, or government notifications indicating exemption status.
6. Will GST 2.0 reforms reduce the price for all medicines?
   No, only medicines and devices designated as essential and exempted get the tax benefit.
7. How do medical device manufacturers report GST on exempt goods?
   They must report supplies as exempt in GST returns under the corresponding chapter headings.
8. Does the 0% GST rate affect export of these medicines?
   Exports continue as per existing rules with zero-rated supplies but proper documentation is essential.
9. Are there penalties for misclassifying GST on healthcare products?
   Yes, misclassification can attract penalties and interest under GST law.
10. How often will the GST Council review healthcare product tax exemptions?
    Reviews depend on policy changes but expect periodic updates to align with health priorities.

Conclusion

GST 2.0’s zero percent tax on essential drugs and medical devices is a significant win for India’s healthcare sector and patients alike. While it opens the door to affordable, life-saving treatment, it also demands precise compliance and operational changes from pharma businesses, hospitals, and pharmacies.

By staying informed about the exempted items, updating billing systems, and maintaining meticulous documentation, businesses in healthcare can leverage these reforms to improve care delivery while ensuring smooth GST compliance.

The power of tax reform lies in healing the nation’s health, one essential drug at a time.

Empowering Indians with Tax & Accounting Knowledge that Matters

© 2025 The Accounting Expert — All rights reserved.

Author Credit: Powered By TheAccountingExpert Team

The Accounting Expert: Master Tax, Audit & Finance — Without Being a CA

Setting Up Multi-Factor Authentication (MFA) on GST Portal: Complete Guide for FY 2025-26

Setting Up & Using Multi-Factor Authentication (MFA) on the GST Portal: Guide for FY 2025-26

Starting FY 2025-26, the GST portal has mandated Multi-Factor Authentication (MFA) for all taxpayers to improve security and prevent fraud. If you haven’t set up MFA yet or want to understand how it works, this comprehensive tutorial will guide you through the entire process—from enabling MFA to troubleshooting common issues.

What You Will Learn

• What MFA means and why it’s critical for GST security in 2025
• Step-by-step process to enable MFA on the GST portal using SMS, authenticator apps, or hardware tokens
• How MFA works during filing GST returns, generating e-invoices and e-way bills
• Troubleshooting common problems like lost devices and OTP failures

Let’s start by understanding what multi-factor authentication exactly is and why it is needed.

What Is Multi-Factor Authentication (MFA) & Why Is It Mandated?

MFA is a security process that requires users to verify their identity using two or more verification methods when accessing an online account. Unlike just a username and password, MFA adds an additional layer such as a code sent via SMS, a time-based OTP from an app, or a hardware token.

Why MFA Is Essential for GST Portal

• Enhanced Security: It reduces the risk of account hacking and unauthorized access.
• Fraud Prevention: Helps safeguard sensitive taxpayer data and transaction details.
• Compliance Requirement: GST authorities have made MFA mandatory to meet global security standards.

How to Enable MFA on GST Portal: Step-by-Step Guide

Step 1: Login to GST Portal

Go to gst.gov.in and log in using your GSTIN and password.

Step 2: Access Profile Settings

Navigate to the ‘My Profile’ section by clicking on your username at the top right corner.

Step 3: Select Multi-Factor Authentication Setup

Click on ‘Setup Multi-Factor Authentication’ to proceed.

Step 4: Choose Your Preferred Method of Authentication

• SMS OTP: Receive a one-time password via SMS on your registered mobile.
• Authenticator App: Use apps such as Google Authenticator or Microsoft Authenticator to generate time-based OTP codes.
• Hardware Token: If you have a physical security token device, register it here.

Step 5: Verify Your Authentication Method

Complete the verification by entering the OTP received via your chosen method.

Step 6: Confirm & Save Settings

Once verified, confirm and save your MFA setup. You will receive a confirmation message.

Using MFA for Different GST Actions

After setting up MFA, you will use it during these critical GST activities:

• Filing Returns: Every time you log in to file GSTR-1, GSTR-3B, or other returns, you will need to authenticate via MFA to access or submit returns.
• Generating E-Invoices: For digitally signed invoices, the GST portal may prompt MFA verification to confirm authenticity.
• Creating E-Way Bills: While creating or modifying e-way bills, MFA provides an additional security layer to prevent unauthorized changes.

Troubleshooting Common MFA Issues

Lost Device or Authenticator App

• Contact GST Helpdesk immediately to report device loss.
• Use backup codes saved during setup for recovery.
• Reset MFA by verifying your identity through alternative methods as per GST portal guidelines.

OTP Not Received or Failed

• Confirm your registered mobile number or email is correct.
• Check network connectivity and SMS balance in case of SMS OTP.
• Sync time on your authenticator app if using TOTP (Time-based One-Time Password).
• Request OTP again if initial delivery fails.

Backup Methods for MFA Access

• Most authenticator apps provide backup codes; save them securely.
• Keep secondary contact details updated with GST portal.
• Use hardware token if available as an alternate device.

Curiosity-Driven Section: Can You Imagine Filing GST Returns Without MFA in 2025?

MFA might seem like an extra step now, but imagine the risks in a world without it—taxpayer data breaches, fraudulent filings, identity theft. Stay with us as we explore how this new security measure protects millions of businesses and transforms compliance.

FAQs on MFA for GST Portal

1. Is MFA mandatory for all GST taxpayers in FY 2025-26?
   Yes, MFA is compulsory for every taxpayer to access the GST portal starting FY 2025-26.
2. Can I use more than one MFA method?
   Yes, you can register multiple MFA methods as backup options.
3. What if I lose my mobile phone with the authenticator app?
   Contact GST helpdesk immediately and use backup codes or alternate MFA methods to regain access.
4. How often do I need to authenticate using MFA?
   MFA is typically required at each login or when performing sensitive actions like filing returns or generating e-invoices.
5. Can I disable MFA once enabled?
   No, once mandated, MFA cannot be disabled due to security compliance.
6. What if my OTP doesn’t arrive via SMS?
   Check network coverage, registered mobile number accuracy, and request OTP again.
7. Are hardware tokens issued by GST authorities?
   Currently, GST portal supports user-provided hardware tokens compliant with security standards.
8. Is MFA applicable to GST practitioners managing returns?
   Yes, all users including practitioners must use MFA to authenticate client filings.
9. Do I need a smartphone for MFA?
   Not necessarily, SMS OTP or hardware tokens can be used instead of authenticator apps.
10. How do I update my registered mobile or email for MFA?
    Update your profile details on the GST portal before MFA setup to ensure OTP delivery.

Conclusion

MFA on the GST portal is not just a regulatory requirement but a vital shield protecting your business from cyber threats and fraud. By setting up MFA correctly, you add a robust layer of security that safeguards your tax filings and sensitive data.

Take advantage of the multiple authentication methods provided to choose what suits you best, keep backup options ready, and stay vigilant to troubleshoot promptly whenever issues arise. Remember, a secure GST filing process means smooth compliance and peace of mind.

As the digital tax landscape evolves, securing your GST access with MFA is your frontline defense—embrace this change confidently.

Empowering Indians with Tax & Accounting Knowledge that Matters

© 2025 The Accounting Expert — All rights reserved.

Author Credit: Powered By TheAccountingExpert Team

The Accounting Expert: Master Tax, Audit & Finance — Without Being a CA

How to Manage Input Tax Credit (ITC) Under GST 2.0: Limits, Ineligibilities & Transition Adjustments Explained

How to Manage Input Tax Credit (ITC) Under GST 2.0: Limits, Ineligibilities & Transition Adjustments

Starting September 22, 2025, GST has introduced critical reforms affecting how Input Tax Credit (ITC) can be claimed. With new restrictions on certain sectors and supplies, it’s crucial for Indian businesses to understand how to correctly manage ITC under GST 2.0 to avoid compliance pitfalls and maximize credit benefits.

What You Will Gain From This Post

• Insight into the sectors and supplies where ITC is now restricted under the new GST regime
• Step-by-step, real-life examples comparing ITC calculation under old vs new GST rules
• Detailed guide on transition adjustments for ITC on stock and inputs procured before GST 2.0 rollout
• Accounting entries, compliance checklist, and common pitfalls to watch out for

Let’s first understand how these reforms impact Indian businesses.

Understanding ITC Restrictions Under GST 2.0

Input Tax Credit is a cornerstone of GST, minimizing tax cascading and cost escalation for businesses. However, the government has introduced restrictions and limits on ITC for specific sectors and types of supplies from September 22, 2025, aiming to streamline credit claims and curb misuse.

Sectors/Supplies with ITC Restrictions

• Real Estate: ITC is no longer allowed on construction materials for residential units sold before completion.
• Restaurants and Food Outlets: ITC claim on food and beverages used in restaurants is restricted unless they serve alcohol (specific exceptions apply).
• Passenger Transport Services: Credit on fuel expenses is now limited.
• Used Goods: ITC eligibility for used goods is highly restricted.
• Goods or Services for Personal Use: ITC is disallowed as before.
• Supply of Motor Vehicles: ITC is limited except when used for resale or transportation of passengers.

These limits mean that businesses in these sectors must carefully review their ITC claims to avoid non-compliance penalties.

Step-by-Step ITC Computation: Old vs New Rules

Consider a manufacturer who purchases raw materials and other inputs.

Particulars	Old GST Rule ITC (₹)	GST 2.0 Rule ITC (₹)
Tax Paid on Raw Materials	100,000	100,000
Tax Paid on Capital Goods	50,000	50,000
Tax Paid on Restricted Supplies (restaurant use)	20,000	0 (restricted)
Total ITC Allowed	170,000	150,000

This simplified example shows how the new regime caps ITC on specific categories.

Real-Life Example: A Restaurant Owner

A restaurant owner paid GST on food ingredients (₹80,000), beverages (₹40,000) and housekeeping services (₹10,000). Under the old regime, the entire amount could be claimed as ITC. Under GST 2.0, ITC on food ingredients is restricted, so only beverages and housekeeping services are eligible.

ITC calculation:

• Food ingredients: ₹80,000 – disallowed under ITC limits
• Beverages: ₹40,000 – allowed
• Housekeeping: ₹10,000 – allowed
• Total ITC Claimable: ₹50,000

How to Handle Transition Adjustment of ITC on Stock/Input Before September 22, 2025

GST 2.0 introduces a transition mechanism for ITC on stock or inputs procured before the change. Businesses must separately account for:

• ITC on invoices received before September 22, 2025, but claimed afterward
• ITC on stock held (closing inventory) on September 21, 2025

Transition Adjustment Procedure

• Compute ITC available on inputs held in stock as of September 21, 2025
• Adjust ITC based on the new eligibility criteria under GST 2.0
• File transition return declaring ITC on such stock separately

Example: Manufacturer with Closing Stock

If the manufacturer has raw material stock worth ₹5,00,000 and paid GST of ₹50,000 before September 22, 2025, and under GST 2.0 certain inputs are restricted, only eligible ITC on these stocks can be carried forward.

Accounting Entries for ITC Under GST 2.0

Key accounting entries when claiming ITC:

• On purchase with tax paid:
  Input GST Credit A/c Dr. (ITC amount)
  To Suppliers / Cash / Bank A/c
• On utilizing ITC against GST liability:
  GST Liability A/c Dr. (ITC used)
  To Input GST Credit A/c
• When ITC is reversed due to restrictions or disallowance:
  GST Liability A/c Dr.
  To Input GST Credit A/c

Compliance Checklist for GST 2.0 ITC Management

• Verify supplier invoices carefully for accuracy and GST compliance
• Identify restricted supplies/sectors in your business profile
• Maintain separate records for ITC eligible and ineligible supplies
• File the transition return accurately for ITC on pre-GST 2.0 stock
• Ensure timely reversal of ineligible ITC
• Regularly reconcile ITC claimed with GSTR-2B and supplier data

Common Pitfalls to Avoid

• Claiming ITC on non-eligible supplies or disallowed sectors
• Failing to carry out transition adjustments correctly
• Not reversing ITC on stock sold or used for non-business purposes
• Ignoring reconciliation issues leading to ITC mismatch notices
• Poor documentation leading to disallowance during audits

Curiosity-Driven Section: What Is the Biggest Mistake Businesses Make With ITC Under GST 2.0?

Many businesses overlook the transition adjustment part and continue to claim old ITC without considering GST 2.0 restrictions, leading to huge liability demands later. Stay tuned as we move to the next tutorial on secure GST access with Multi-Factor Authentication to protect your filings.

FAQs on ITC Under GST 2.0

1. What sectors have new ITC restrictions under GST 2.0?
   Real estate, restaurants, passenger transport, motor vehicles, used goods, and personal use goods are mainly affected.
2. Can ITC be claimed on stock purchased before September 22, 2025?
   Yes, subject to transition adjustments and eligibility under new rules.
3. How do I file a transition return for ITC?
   The GST portal will provide a special window for transition return filing with detailed instructions.
4. What happens if I claim ITC incorrectly?
   You may face penalty, interest, and ITC reversal demands during audits.
5. Are food and beverages always restricted for ITC?
   Restaurants face ITC restrictions for food ingredients but can claim on beverages and certain services.
6. Can ITC be claimed on used goods?
   Generally restricted unless used for specific business purposes like resale.
7. Is ITC allowed on capital goods?
   Eligible capital goods continue to have ITC claims allowed unless restricted by the sector.
8. How should ITC reversal be done in accounting?
   Adjust Input GST Credit account and GST Liability account accordingly during reversal.
9. What documents must be maintained for ITC claims?
   Supplier invoices, GST returns, transition return filings, stock records, and reconciliation reports.
10. Can ITC claimed be carried forward if unutilized?
    Yes, as per usual GST rules, subject to compliance and eligibility.

Conclusion

Managing Input Tax Credit under GST 2.0 requires a fresh, vigilant approach to understand sector-specific limits, make correct transition adjustments, and maintain robust records. Compliance will protect your business from penalties and optimize tax costs.

From verifying restrictions on your supplies to accurately computing ITC on closing stocks pre-GST 2.0, a structured approach will help you sail smoothly through these reforms. Remember, staying updated on GST changes and proactive reconciliation is the key to leveraging the full benefits of ITC.

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