MM TAX CLUB

The 56th GST Council meeting in New Delhi has brought in major changes to GST rates, exemptions, and rationalisation across goods and services. These changes are aimed at simplifying the structure, reducing disputes, and balancing the needs of both consumers and manufacturers.

Here’s a simple FAQ guide to help you understand what’s changing and how it impacts you.

1. When will the new GST rates come into effect?

The revised GST rates on most goods and services will be effective from 22nd September, 2025.

• For goods like cigarettes, zarda, unmanufactured tobacco, and beedi, the existing rates continue for now. The new rates for these will apply only after compensation cess-related loans are fully repaid.

2. Has the registration threshold under GST changed?

No. The registration threshold under CGST Act, 2017 remains unchanged.

3. Where will the revised rates be notified?

All rate changes will be published through notifications on the CBIC website.

4. What if I supply goods/services before the new rates but raise invoices later?

As per Section 14 of the CGST Act, 2017:

• If payment is received after the rate change, tax liability arises on the earlier of invoice date or payment date.

• If payment was received before the rate change, liability will be on payment date.

5. What happens to ITC (Input Tax Credit) for purchases made before the change?

You can continue to claim ITC on purchases at the rates applicable when you bought them, as long as the invoices were compliant.

6. Will e-way bills need to be cancelled after rate changes?

No. E-way bills already generated remain valid. No need to cancel and regenerate.

7. Key GST rate changes at a glance

• UHT Milk & Plant-based Milk – Now exempt / reduced to 5%.

• Indian breads (paratha, roti, etc.) – Now fully exempt.

• Agricultural machinery & equipment – Reduced from 12% to 5%.

• Medicines & Medical Devices – Standardised at 5% to lower healthcare costs.

• Vehicles

  • Small cars: Reduced to 18%

  • Mid-size/large cars & SUVs: 40% (no cess, but higher rate)

  • 3-wheelers, buses, trucks: 18%

  • Motorcycles up to 350cc: 18% (above 350cc: 40%)

• Bicycles & parts – Reduced to 5%.

• Soaps, shampoos, face powders – Daily use items reduced to 5%.

• Toothpaste, toothbrush, dental floss – 5% for dental hygiene goods.

• Renewable energy equipment – Reduced to 5%.

• Spectacles for vision correction – 5% (was 12–18%).

• Batteries – Uniform 18%.

• Air Conditioners, Dishwashers, TVs, Monitors – Now 18%.

• Beauty, salon, fitness services – Reduced to 5% (without ITC).

• Betting, gambling, casinos, online gaming, IPL tickets – Taxed at 40%.

8. Why have some goods not been fully exempted?

In many cases (e.g., medicines, farm equipment), full exemption would block ITC for manufacturers, increasing production costs and leading to higher consumer prices. Instead, reduced rates ensure relief while keeping the input credit chain intact.

9. Transportation Services under GST

• Passenger transport (buses, cabs, etc.) – 5% without ITC or optional 18% with ITC.

• Goods transport by GTA – 5% without ITC or optional 18% with ITC.

• Multimodal transport – 5% (if no air transport) else 18%.

• Container Train Operators – Option of 5% without ITC or 18% with ITC.

10. Big Picture – Why these changes?

The Council has tried to:

• Simplify GST rates to avoid misclassification disputes.

• Promote domestic manufacturing by avoiding complete exemptions.

• Support consumers by reducing rates on essential/daily-use items.

• Encourage green energy and healthcare with concessional rates.

• Replace compensation cess with special GST rates on luxury and sin goods.

???? These changes are a step towards GST 2.0, with fewer rates, simpler compliance, and a balance between government revenue and consumer relief.