Key GST Changes Announced in Union Budget 2025-26: Impact on Businesses

The Union Budget 2025-26 introduced several significant amendments to the GST framework. The most impactful change is the amendment to Section 17(5), which now allows input tax credit on certain categories of goods and services that were previously blocked. Specifically, businesses can now claim ITC on construction services for plant and machinery used in the course of business, provided the structure is directly linked to manufacturing operations.

The composition scheme threshold has been revised upward to ₹2 crore for goods traders and ₹75 lakh for service providers. This will reduce the compliance burden for thousands of small businesses that were on the margins of the existing threshold. Businesses opting for the composition scheme pay a flat tax rate (1% for traders, 6% for service providers) and file only one quarterly return (CMP-08) and one annual return (GSTR-9A).

E-commerce operators now face additional TCS (Tax Collected at Source) obligations. From April 1, 2025, all platforms facilitating digital services — including app-based delivery, online retail, and ride-hailing — must collect 1% TCS on net sales value and remit it by the 10th of the following month. Vendors on these platforms must reconcile TCS collected with their GST returns monthly.

The Budget also introduced mandatory e-invoicing for businesses with turnover exceeding ₹5 crore (previously ₹10 crore). Businesses that are newly covered under this threshold have until June 30, 2025 to integrate their accounting software with the IRP (Invoice Registration Portal). Our GST team can help you with integration and transition to e-invoicing compliance.