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Major Changes in GST Return Filing from October 2025

With effect from 1st October 2025, the Indian GST regime is set to introduce a series of important changes in how returns, credits, and compliance are handled. These changes aim to improve accuracy, reduce disputes, and align law and system behavior more closely. In this post, we explain the critical updates, their implications, and what businesses need to do now.

1. Legal Basis & Notification

The government has invoked Notification No. 16/2025 – Central Tax, dated 17 September 2025, to bring various provisions of the Finance Act, 2025 into force starting 1 October 2025.
These changes affect multiple laws within the GST framework: return filing, input tax credit (ITC) rules, credit/debit note provisions, appeals & penalties, and new compliance tools like Track & Trace.
The official GST portal has published an advisory (News & Updates item 628) clarifying many of the new features, especially around the Invoice Management System (IMS).

2. What’s Changing in Return / ITC Regime

2.1 Amendment of Section 38: Drop of “Auto-Generated Statement” Phrase

From 01.10.2025, for the words “Auto Generated Statement”, the word “Statement” is substituted under Section 38 of the CGST Act.
This change indicates that the GSTR-2B will not remain entirely system-driven; instead, it will become subject to actions by the recipient taxpayer through IMS (accept/reject/pending).
In short, the system will still prepare a draft GSTR-2B, but recipients may need to review and take action as required. However, as clarified in the latest GST advisory issued on 8th October 2025, GSTR-2B will continue to be generated automatically on the 14th of every month.

2.2 Role of the Invoice Management System (IMS)

The Invoice Management System (IMS) remains central to India’s evolving GST compliance process, ensuring transparency and two-way validation of invoice data.

October 2025 Enhancements to IMS:

Buyer Remark Feature:
Recipients can now add remarks or comments while taking action on invoices — whether rejecting, or keeping them pending. This new capability improves audit trails, enhances communication between buyers and suppliers, and helps explain mismatches during reconciliation or departmental scrutiny.
Clarification on GSTR-2B Generation:
As per the latest GSTN advisory dated 8th October 2025, GSTR-2B will continue to be generated automatically on the 14th of every month, even though it is now subject to recipient actions in IMS.
Deemed Acceptance & Reconciliation:
If no action is taken before GSTR-2B generation, invoices will be treated as “deemed accepted”. Recipients can still modify or update their actions later, but reconciliation must be completed before filing GSTR-3B.

These enhancements make IMS a more interactive, user-controlled platform enabling real-time validation and remark-based documentation for ITC decisions.

2.3 Changes in Credit Note / Debit Note Handling

Under the prior regime, in many cases, suppliers could reduce their output tax liability by issuing credit notes, without necessarily ensuring the corresponding reversal of ITC by the recipient. This created mismatches and disputes.
The amended provision to Section 34(2) now mandates that the recipient must reverse any ITC already claimed, before the supplier’s output liability is reduced. In other words, a credit note can only reduce a supplier's tax liability if the recipient has reversed its credit.
This aligns the supplier-recipient paths and ensures consistency in tax records.

2.4 Track & Trace (TTM) of Specified Goods

A new legal framework under Section 148A enables Track & Trace Mechanism for goods specified by the government (typically goods prone to evasion or misuse).
Noncompliance will attract penalties under Section 122B.
This introduces a supply chain visibility requirement, likely involving digital tagging, unique marking, or serialization of goods.

2.5 Tighter Appeal Pre-Deposit & Penalty Provisions

The October 2025 GST amendments introduce two key compliance tightening measures — a new penalty for Track & Trace violations and revised pre-deposit rules for appeals.

1. Penalty for Non-Compliance with Track & Trace Mechanism (Section 122B):‍

A new Section 122B has been inserted, under which failure to comply with the Track & Trace mechanism for specified goods can attract a penalty of ₹1,00,000 or 10% of the tax payable on such goods, whichever is higher.

This provision aims to strengthen supply chain monitoring, curb evasion, and ensure traceability of goods under GST.

2. Mandatory Pre-Deposit for Penalty Appeals:‍

For orders imposing only a penalty (with no tax demand), taxpayers must now pay a 10% pre-deposit of the penalty amount before filing an appeal.

This change discourages frivolous appeals and ensures genuine dispute resolution while improving tax recovery efficiency.

Impact:
Together, these measures make the law tougher on non-compliance and reinforce the government’s focus on real-time tracking and anti-evasion enforcement.

2.6 Invoice-Wise Reporting in GSTR-7 (TDS Returns)

A significant compliance enhancement introduced from 1st October 2025 is the requirement to report TDS details invoice-wise in GSTR-7.

Earlier, deductors could report consolidated TDS data, but now each transaction must be linked to the specific invoice on which tax is deducted. This update promotes better traceability and helps match TDS deductions with suppliers’ corresponding invoices in GSTR-2A/2B.

This change is expected to:

Simplify cross-verification between suppliers and deductors.
Reduce mismatches in TDS credits.
Strengthen audit and reconciliation accuracy for government entities and large taxpayers.

3. Clarifications & GSTN Advisory

Given the many changes and some confusion, the GST Network (GSTN) released a clarificatory advisory dated 8 October 2025 to dispel misunderstandings.

Key clarifications include:

No change in ITC auto-population: Even with IMS, the mechanism of auto-populating eligible ITC (from 2B into 3B) continues. Taxpayers do not have to manually transfer credit.
GSTR-2B generation remains automatic on 14th: The monthly 2B will still be generated automatically on the 14th day of the next month, without taxpayer intervention.
Regeneration allowed before 3B filing: After initial 2B generation, taxpayers can still make changes in IMS (accept/reject) and regenerate the 2B before 3B filing, to reflect latest decisions.
Credit Note flexibility: Recipients may keep credit notes pending for one tax period; once accepted, they may adjust ITC reversal only to the extent they had availed credit earlier.

These clarifications are important to reduce panic or incorrect expectations.

GSTR-2B Continues Auto-Generation with Enhanced Review Controls (Historical vs. Changed)

GSTR-2B was entirely auto-generated by the GST system, requiring no action from recipients. The portal automatically compiled supplier data from GSTR-1 filings, aggregated inward supplies, and produced GSTR-2B for ITC claims.

From October 2025, that process has changed. The system will still generate a draft GSTR-2B, but the final inclusion or exclusion of invoices now depends on the recipient’s actions within the Invoice Management System (IMS). Taxpayers can accept, reject, or keep records pending, giving them greater control over which invoices are reflected in their statement.

As clarified in the latest GST advisory dated 8th October 2025, GSTR-2B will continue to be generated automatically on the 14th of every month, ensuring consistency in compliance timelines.

This evolution shifts GSTR-2B from a fully automated to a semi-automated, review-based system, requiring recipients to actively monitor and reconcile their inward records. By validating each invoice, businesses can ensure accurate ITC claims and minimize future compliance disputes.

What Businesses Should Do Immediately

To navigate these changes without disruption, taxpayers and their teams should:

Understand the new IMS dashboard and features
Train staff to accept/reject/pending records, to recompute/regenerate 2B, and to monitor pending items.
Update accounting / ERP / GST software
Ensure your systems support the new IMS workflows and can integrate with GSTN’s recompute/regeneration features.
Conduct inward supply reconciliation more diligently
Don’t wait till the last moment; regularly validate supplier data, credit notes, amendments, and mismatches.
Maintain communication with suppliers
Suppliers should ensure accurate reporting in GSTR-1 / IFF / 1A so that recipient side IMS actions align with outgoing declarations.
Review past credit note practices and reversal policies
Check whether recipient side reversal has been done properly before issuing or accepting credit notes, to avoid mismatches.
Stay updated with official FAQs / circulars
Watch the GST portal for more clarifications, especially as edge cases surface.
Seek professional advice
For complex cases (exporters, SEZ units, large supply chains), consult a GST expert or tax advisor to assess specific impacts.

Conclusion

The GST return filing changes effective from 1st October 2025 mark one of the most significant compliance upgrades since GST’s inception. These reforms aim to promote greater transparency, real-time validation, and shared accountability between suppliers and recipients.

With the new Invoice Management System (IMS) and revised rules for GSTR-2B and credit notes, businesses must shift from passive reporting to active data management. Proper reconciliation, supplier coordination, and internal control over ITC will be crucial.

Though the transition may seem challenging, these reforms will reduce mismatches, enhance accuracy, and build confidence in the GST framework. Adopting technology and automation early will help businesses stay compliant and future-ready.