Major GST Compliance Updates for 2025: Mandatory MFA, E-Way Bill Restrictions and More

As we approach the start of the new year, businesses operating under India's Goods and Services Tax (GST) regime should prepare for a series of significant compliance changes. From the introduction of mandatory multi-factor authentication (MFA) requirements to tighter restrictions on E-Way Bill (EWB) generation and extensions, these updates reflect the Indian government's ongoing efforts to streamline the GST process, enhance digital security, and ensure greater transparency and discipline within the supply chain ecosystem.

The GST Network (GSTN), in collaboration with the National Informatics Centre (NIC), has announced updated versions of the E-Way Bill and E-Invoice systems that will take effect starting 1st January 2025. These changes aim to address several important aspects of GST compliance, including strengthening portal security against unauthorized access, ensuring timely generation of E-Way Bills, and preventing indefinite extensions of these documents.

This article delves deep into each of these updates, explains their implications, and offers practical guidance to help businesses incorporate these changes into their daily operations.

Understanding the Context: Why These Changes Matter

Before we break down the specifics, it's essential to understand the broader context behind these updates. The GST system, launched in July 2017, represented a landmark reform in India's indirect taxation landscape, consolidating numerous state and central levies into a single, unified framework. Over the years, both taxpayers and tax administrators have worked through various challenges, from technical glitches to compliance complexities.

Continuous improvements to the E-Way Bill and E-Invoice systems reflect efforts to simplify processes, curb tax evasion, and reduce manual intervention. By leveraging technology and automation, the government aims to build trust in the system and foster a fair playing field for all businesses, large and small. However, with increased digitization comes the need for stronger security measures and the introduction of MFA. Additionally, controlling the time frames within which EWBs can be generated or extended seeks to address issues such as fraudulent backdating of invoices, improper handling of logistics, and protracted movement of goods.

Overall, these changes are designed to create a more disciplined compliance environment that benefits honest taxpayers. As we enter 2025, the key to a smooth transition lies in understanding these changes thoroughly and adapting internal processes accordingly.

1. Multi-Factor Authentication (MFA) Becomes Mandatory

What Is MFA?

Multi-factor authentication adds an extra layer of security to the login process on the E-Invoice and E-Way Bill portals. Traditionally, users accessed these platforms through a username and password. With MFA, users must also provide a One-Time Password (OTP) sent to a registered mobile number or approved communication channel (e.g., the Sandes app) before gaining access. This ensures that even if a password is compromised, unauthorized parties cannot easily access the system without the corresponding OTP.

Current Status of MFA

• Since 20th August 2023, MFA has been mandatory for taxpayers with an Annual Aggregate Turnover (AATO) exceeding Rs 100 Crores.
• Since 11th September 2023, MFA has been optional-but not mandatory-for taxpayers with AATO exceeding Rs 20 Crores.

Changes Effective in 2025

To bolster security further, MFA's mandatory requirement will be expanded to a wider range of taxpayers:

• From 1st January 2025: MFA will become mandatory for taxpayers with an AATO exceeding Rs 20 Crores.
• From 1st February 2025: MFA will become mandatory for those with an AATO exceeding Rs 5 Crores.
• From 1st April 2025: MFA will be compulsory for all remaining taxpayers and users, regardless of turnover.

What This Means for Your Business

If you're a taxpayer operating above these turnover thresholds, the timeline is quite clear. For large and medium-sized businesses, the adoption of MFA is imminent. Smaller enterprises should also start preparing, as by April 2025, every user-no matter the size-will need to log in using MFA.

Key Action Points

1. Update Your Registered Mobile Number: Ensure that the mobile number associated with your GSTIN is correct and accessible. If your contact details are outdated, you may face difficulties receiving the OTP required for login.
2. Train Your Team: Implementing MFA involves a behavioral change. Your accounting, finance, and compliance teams should understand the new login process. Consider conducting brief training sessions or distributing step-by-step guides to avoid confusion.
3. Enable MFA Early: Even if the mandate for your turnover bracket kicks in later, consider enabling MFA at the earliest convenience. Early adoption can help your team acclimate to the new requirements, reduce the risk of last-minute technical issues, and ultimately ensure a smoother transition.
4. Review IT Infrastructure: Check if your internal IT or ERP systems integrate seamlessly with MFA-enabled logins. Some businesses have single sign-on mechanisms or third-party compliance software that might need adjustments to fully support MFA.

By embracing MFA as a necessary security enhancement rather than a compliance burden, you can protect sensitive business information, prevent unauthorized activities, and ultimately foster greater trust in the GST ecosystem.

2. Restricting the Period for E-Way Bill Generation

The Current Scenario

E-Way Bills form a critical part of GST compliance, ensuring the legitimacy of the movement of goods from one place to another. Until now, businesses often had flexibility in generating EWBs based on invoices or other related documents-sometimes using documents issued well in the past.

This leeway, while convenient, could potentially lead to misuse. For instance, backdated invoices or outdated documentation could be used to generate EWBs, undermining the integrity of the compliance system. Delayed creation of EWBs could also create confusion and inefficiencies, impacting inventory management and logistical planning.

What's Changing?

From 1st January 2025, the generation of an E-Way Bill will be restricted if the base document (like an invoice, bill of supply, or delivery challan) is older than 180 days from the intended date of generating the EWB.

For Example: If on 1st January 2025, you attempt to create an EWB using an invoice dated before 5th July 2024, the system will reject the request. This cut-off ensures that the EWB corresponds to relatively recent transactions, limiting the scope for manipulations and ensuring that the goods in question are being moved within a reasonable timeframe of the original transaction date.

Implications for Businesses

• Timely Invoice Processing: You must ensure that invoices intended for the movement of goods are processed and matched with EWBs promptly. Waiting too long to create an EWB after issuing an invoice can lead to non-compliance if the 180-day window expires.
• Streamlined Operations: This change encourages businesses to keep their invoicing and logistics processes in sync. Efficient workflows ensure that as soon as an invoice is generated, plans for dispatch and EWB creation follow suit, reducing delays and last-minute compliance hurdles.
• Reduced Risk of Fraudulent Practices: By restricting the use of older documents, the system curtails opportunities for backdated entries or manipulations meant to facilitate tax evasion or misrepresentation.

Action Steps to Comply

1. Review Internal Processes: Assess your current turnaround times between invoice generation and EWB creation. If you have a backlog or practice of creating EWBs long after invoices are issued, update your procedures to prevent delays beyond the 180-day window.
2. Automate Where Possible: Consider using GST-compliant software that can track invoice dates and alert you when approaching deadlines for EWB generation. Automation helps maintain discipline and ensures you remain well within compliance thresholds.
3. Inventory and Supply Chain Alignment: Your supply chain management teams should be aware of the new timeline. They need to coordinate with the billing and accounts teams to ensure that goods are scheduled for dispatch well before invoices become "too old" for EWB generation.

By proactively adjusting your operations to accommodate these restrictions, you'll minimize non-compliance risks and keep your supply chain running smoothly.

3. Restricting Extensions of E-Way Bills

The Current Flexibility

Under the existing system, E-Way Bills can be extended to accommodate delays in the movement of goods. Extensions are sometimes necessary due to unforeseen circumstances such as breakdowns, transportation strikes, natural disasters, or other logistical challenges. However, excessive or indefinite extensions can raise red flags and lead to concerns about the authenticity of the entire transaction.

What's Changing?

Starting 1st January 2025, the extension of E-Way Bills will be capped at a total of 360 days from the original generation date. After this period, it will no longer be possible to extend the EWB, effectively placing a hard limit on how long goods can remain "in transit" on paper.

Example: If you generate an E-Way Bill on 1st January 2025, you may extend it as needed, but all extensions combined cannot surpass 360 days from that initial date. Practically, this means you cannot have a valid E-Way Bill beyond 25th December 2025 (accounting for 360 days from the original generation), regardless of circumstances.

Implications for Businesses

• Encouraging Efficient Logistics: This change pushes businesses to optimize their supply chain and minimize long transit times. Goods should reach their destination or pass through their journey efficiently, reducing the risk of multiple, prolonged extensions.
• Reducing Regulatory Suspicion: Having EWBs open for nearly a year without closure is already quite generous. Limiting this to 360 days ensures that the concept of E-Way Bills retains integrity. It becomes less likely that an EWB is being used as a cover for goods that aren't actually in transit.
• Planning and Coordination: Logistics managers, carriers, and compliance teams must coordinate to ensure that extensions are requested only when genuinely required. Planning realistic timelines and building contingencies into your shipping schedules will help avoid hitting the 360-day limit.

Action Steps

1. Optimize Your Supply Chain: Work closely with logistics partners, identify common delays, and find solutions. This could involve choosing more reliable carriers, revising your distribution networks, or maintaining buffer inventories at strategic locations.
2. Regularly Monitor EWB Validity: Implement a system to track each EWB's generation date and its approaching 360-day limit. Alerts or dashboard indicators can help you stay ahead of deadlines and take corrective measures before compliance windows close.
3. Clear Communication: Ensure that your compliance team communicates these new constraints to stakeholders, including transporters, third-party logistics (3PL) providers, and warehouse managers. Everyone in the chain should understand that indefinite EWB extensions are no longer an option.

By internalizing these changes and maintaining tighter control over transit times, you'll not only stay compliant but also foster a more predictable and reliable logistics environment.

Preparing Your Business for the Transition

As these measures come into effect, businesses have a few months to adapt. Ideally, the transition should be smooth if you take proactive steps now:

1. Early Adoption and Familiarization: Don't wait until the deadlines approach. Start using MFA, restricting EWB generation timelines, and planning for the new extension limits right away. Early practice will minimize last-minute panic and reduce the risk of non-compliance.
2. Update Internal SOPs and Manuals: Revise your Standard Operating Procedures (SOPs), training manuals, and internal compliance guidelines. Clearly outline the new requirements, timelines, and processes. Make sure everyone in the organization, from your junior clerks to senior managers, understands these changes.
3. Leverage Technology Solutions: Many advanced ERP systems and GST compliance software solutions already provide features like automatic OTP integrations, invoice-to-EWB linking, and EWB validity tracking. Consider investing in or upgrading to software that simplifies compliance, automates routine checks, and provides timely alerts.
4. Educate and Engage with External Stakeholders: Your vendors, suppliers, customers, and logistics partners should also be aware of these changes, especially if they impact shared processes. If your suppliers are responsible for generating EWBs for consignments headed your way, ensure they understand the revised timelines and MFA requirements. Similarly, if you are a supplier, inform your customers and downstream partners about potential changes in how quickly you can dispatch and how you'll handle extensions.
5. Monitor Official Portals and Notifications: The GSTN and NIC are likely to issue additional advisories, FAQs, and user manuals as these changes come closer to their enforcement dates. Keep a close eye on official E-Invoice and E-Way Bill portals. Regularly visiting these portals will ensure you have the latest instructions, updates, and support resources at your disposal.
6. Seek Professional Advice if Needed: If you find the compliance environment complex or if you are unsure about how to reorganize your workflows, consider consulting a GST practitioner or a tax professional. Expert advice can clarify doubts, help implement best practices, and ensure that you meet the new regulatory standards without disruptions.

The Bigger Picture: Towards a More Mature GST Regime

These updates aren't isolated tweaks-they're part of a broader narrative of GST maturation. Over the past few years, India's GST ecosystem has evolved from a nascent framework riddled with teething issues to a more stable, technology-driven system. The introduction of E-Invoicing, the consolidation of return forms, periodic system upgrades, and now, these new measures collectively strengthen the framework, reduce the scope for malpractice, and instill confidence among taxpayers and administrators alike.

• Security and Authenticity: By making MFA mandatory, the GSTN ensures that only authorized users access sensitive portals, thereby reducing the risk of fraudulent claims or misuse of credentials.
• Integrity of Transactions: Restricting E-Way Bill generation to documents not older than 180 days ensures that the relationship between an invoice and the actual movement of goods remains timely and genuine. Similarly, capping the EWB extension period encourages businesses to plan and complete their logistics operations within a reasonable timeframe.
• Enhanced Transparency and Accountability: As these rules tighten, the GST system becomes a stronger deterrent against tax evasion, sham transactions, and other malpractices. Over time, improved transparency will lead to a healthier tax environment, benefiting honest taxpayers and contributing positively to government revenues.
• Efficiency Gains: While compliance changes can seem daunting at first, in the long run, these measures will help businesses operate more efficiently. Automation, better coordination between departments, and reduced delays in goods movement all work towards smoother operations and potentially better relationships with suppliers, customers, and logistics providers.

Common Questions and Concerns

1. What if my business falls under multiple categories over time due to fluctuations in turnover?

As your AATO changes, the corresponding requirements for MFA and other measures will apply based on the turnover threshold in the relevant financial year. It's important to monitor your turnover and ensure compliance with the rules appropriate to your category. If your turnover crosses Rs 5 Crores, for instance, you must follow the MFA deadlines that pertain to that threshold. Stay proactive and adjust as your business grows or contracts.

2. Will there be a grace period for implementing these changes after the deadlines?

The advisory does not mention any grace period. Typically, once a rule comes into effect, it's mandatory for everyone it covers. Hence, it's best to assume that the deadlines are firm and final. Start preparing now so that you're fully compliant by the designated dates.

3. What happens if I fail to comply with these new rules?

Non-compliance could lead to various consequences. For MFA non-compliance, you may simply be unable to access the portals and file necessary documents, causing operational delays. For EWB-related non-compliance, the system will not allow E-Way Bill generation or extension beyond the stipulated time frames. In more severe cases, consistent non-compliance can attract penalties or scrutiny from tax authorities. Hence, it's in your best interest to comply proactively.

4. Can third-party service providers manage these requirements on my behalf?

Many businesses rely on external GST consultants, service providers, or compliance solutions to handle aspects of return filing, invoicing, and EWB generation. Check with your service providers if they offer support for MFA management, automatic alerts for EWB validity, and other compliance tools. Outsourcing these tasks to reliable partners can lighten the compliance burden, but remember that the ultimate responsibility remains with your business.

Final Thoughts

The changes announced by GSTN and NIC for E-Way Bills and E-Invoices represent another step forward in refining the GST framework. By mandating MFA, the system safeguards against unauthorized access and builds trust in digital transactions. By restricting EWB generation and extensions, it encourages timely, disciplined business practices that reduce opportunities for errors and fraud.

While adapting to these changes may require some effort-updating internal protocols, training staff, and possibly investing in better technological solutions-the long-term benefits are worth it. Businesses that embrace these compliance measures can enjoy smoother operations, enhanced security, and reduced risks of non-compliance, ultimately fostering an environment where honest taxpayers thrive, and the tax system functions as intended.

As we move toward 2025, preparedness is key. Review the guidelines, assess your current workflows, and make necessary adjustments now. With a proactive approach, you can enter the new year confident in your ability to meet these updated GST compliance standards. For the latest official instructions and resources, don't forget to regularly visit the E-Invoice and E-Way Bill portals, ensuring that you remain well-informed and ready to navigate India's evolving tax landscape.