Haryana Amends Goods and Services Tax Act, Introduces Track and Trace Mechanism

The Haryana Goods and Services Tax (Amendment) Act, 2025 (Haryana Act No. 21 of 2025), received the assent of the Governor of Haryana on September 11, 2025, and was subsequently published for general information on September 16, 2025. This legislative instrument, an amendment Act, was enacted to further modify the Haryana Goods and Services Tax Act, 2017, aiming to refine and update the state's indirect tax framework. While certain provisions, specifically sections 2(ii), 2(iii) to 5, and 7 to 15, are slated to come into force from a date to be appointed by the Government through official notification, other key amendments, including those in sections 2(i) and 6, were deemed to have taken effect retrospectively from April 1, 2025. Furthermore, significant clarifications in section 5(i) and (ii), and section 14, were given retrospective effect from July 1, 2017.

Among the notable changes, the Act amended section 2 of the principal Act, which deals with definitions. It inserted references to the Integrated Goods and Services Tax Act, 2017, within the definition of "taxable person" in clause (61). Clause (69)(c) was expanded to include "fund" after "management of a municipal," and an Explanation was added to define "local fund" and "municipal fund," clarifying their scope for local self-government authorities discharging civic functions. A new clause (116A) was inserted to define "unique identification marking" as a unique, secure, and non-removable digital stamp, digital mark, or similar marking, specifically in the context of the newly introduced track and trace mechanism. The Act also omitted sub-section (4) of section 12 and sub-section (4) of section 13 of the principal Act, which pertained to certain aspects of the time of supply for goods and services.

A significant retrospective amendment was made to clause (d) of sub-section (5) of section 17, which addresses input tax credit (the credit available to a taxpayer for taxes paid on inputs used in manufacturing or providing services). The phrase "plant or machinery" was substituted with "plant and machinery," with this change deemed effective from July 1, 2017. This clarification was accompanied by an Explanation to resolve long-standing ambiguities. The legislation provided: “Explanation2.- For the purposes of clause (d), it is hereby clarified that notwithstanding anything to the contrary contained in any judgment, decree or order of any court, tribunal or other authority, any reference to plant or machinery shall be construed and shall always be deemed to have been construed as a reference to plant and machinery.” This aims to provide definitive guidance on what constitutes eligible capital goods for input tax credit purposes, overriding any prior judicial interpretations.

Further amendments included modifications to section 34, which now stipulates that no reduction in output tax liability (the tax payable on outward supplies) through credit notes will be permitted if the input tax credit attributable to such a credit note has not been reversed by the recipient (if registered), or if the incidence of tax has been passed on to another person in other cases. Section 38 was amended to replace "an auto-generated statement" with "a statement" and to allow for the inclusion of "such other details, as may be prescribed." Section 39(1) was also modified to allow for the furnishing of returns "within such time and subject to such conditions and restrictions."

The Act introduced new conditions for filing appeals against orders demanding penalties. For appeals to the Appellate Authority under section 107(6), a sum equal to ten per cent of the penalty must now be paid if the order demands penalty without involving any tax demand. Similarly, for appeals to the Appellate Tribunal under section 112(8), an additional ten per cent of the penalty must be paid under the same circumstances, over and above existing pre-deposit requirements. A new section 122B was inserted, prescribing a penalty of one lakh rupees or ten per cent of the tax payable on such goods, whichever is higher, for failure to comply with the track and trace mechanism.

A significant new regulatory framework was established through the insertion of section 148A, titled "Track and trace mechanism for certain goods." This provision empowers the Government, based on the recommendations of the GST Council, to specify goods and the persons or class of persons dealing with such goods to which this mechanism will apply. It enables the Government to provide a system for affixing unique identification markings, such as digital stamps or marks, and for the electronic storage and access of information contained therein. Persons covered by this section are mandated to affix these markings, furnish prescribed information and details, maintain records, provide details of manufacturing machinery, and pay prescribed amounts related to the system. Additionally, Schedule III of the principal Act was amended retrospectively from July 1, 2017, to include the supply of goods warehoused in a Special Economic Zone (SEZ) or a Free Trade Warehousing Zone (FTWZ) to any person before clearance for exports or to the Domestic Tariff Area (DTA) as a non-taxable supply. The Act also included a provision stating that no refund shall be made for tax collected that would not have been collected had the Schedule III amendment been in force at all material times.

The legislative intent behind these amendments is to enhance clarity, improve compliance, and streamline the administration of the Goods and Services Tax regime in Haryana. The retrospective application of certain provisions aims to address and rectify ambiguities that arose since the inception of GST, particularly concerning the eligibility for input tax credit on "plant and machinery," thereby providing certainty to taxpayers and tax authorities. The introduction of the track and trace mechanism for specific goods reflects a policy rationale to combat illicit trade, ensure product authenticity, and improve revenue collection by enabling better monitoring and enforcement. By defining "local fund" and "municipal fund," the Act clarifies the tax treatment for entities involved in local self-governance. The revised conditions for credit notes aim to prevent misuse and ensure proper adjustment of output tax liability. Furthermore, the new pre-deposit requirements for appeals against penalty orders are designed to discourage frivolous litigation and ensure a minimum commitment from appellants. These changes collectively aim to strengthen the legal framework, foster greater transparency, and ensure the efficient functioning of the GST system in the state.

Keywords: Haryana GST, GST Amendment Act 2025, Goods and Services Tax, Input Tax Credit, Track and Trace Mechanism, Haryana Legislature, Tax Law, Fiscal Policy, SEZ, FTWZ

Geo Tags: India, Haryana District: Not Applicable