GST Input Tax Credit (ITC) – Major Changes in 2025 and Their Impact

One of the most discussed topics in GST reforms this year is the significant change in Input Tax Credit (ITC) rules. With the Union Budget 2025, ITC availability has been tightened to ensure better compliance and plug revenue leakages.

  • Supplier-Based ITC Restriction: ITC can now only be claimed if the supplier has filed GST returns and paid tax. This will directly impact buyers dealing with non-compliant vendors.
  • Reversal Provisions: Specific timelines have been introduced for ITC reversal in case of non-payment to suppliers.
  • Sector-Specific Relaxations: MSMEs have been given some breathing space with simplified ITC reconciliation norms.

Impact on Businesses:

  • Businesses must strengthen vendor due diligence.
  • Increased importance of real-time GST reconciliation.
  • Enhanced compliance burden, but greater transparency in tax credits.

Practical Tip for CAs & Businesses: Invest in GST compliance software and vendor management systems. Regularly check supplier compliance status to avoid ITC denial. CAs should advise clients to conduct periodic ITC audits.

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