The new GST structure, which has seen rate cuts on a host of goods and services, will come into effect on September 22.
Economists have said that GST rate cuts will boost consumer spending and spur economic growth. At a time when US President Donald Trump's tariffs are expected to drag down growth this year by up to 1 per cent, economists have said that GST cuts-induced consumer spending could halve this loss.
In case you are confused
1. When will the changes in GST rates come into force?
As per recommendations of the GST Council in its 56th meeting, the changes in GST rates on services and goods other than cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and beedi, will be effective from 22nd September, 2025. For the specified goods namely, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and beedi, the existing rates of GST and compensation cess will continue to apply and
2. Is there any change in threshold of the registration required for goods under CGST Act, 2017?
No, there is no change in threshold of the registration required for goods under CGST Act, 2017.
3. Which notification provides for the revised rates?
The changes in GST rates will be notified in the rate notification. The notification would be placed on CBIC
4. What happens to the applicable rate of tax, if I had supplied goods/services or both before the changes in GST rates come into force but the invoices were issued later?
As per Section 14 (a)(i) of CGST Act, 2017, in case the goods or services or both have been supplied before the change in rate of tax, and the invoice for the same has been issued after the change in rate of tax, then the time of supply i.e. date of liability to pay tax on such supply will be as follows:
i. If the payment
ii. If the payment has been received before the change in rate of tax, the time of supply shall be the date of receipt of payment.
5. What would be the GST rate applicable if I have received advances for supply of goods/services or both but supply has not been completed or invoice is not issued?
The GST rate will be determined as per the time of
6. What will happen to the ITC for purchases made before changes in GST rates came into effect? Will I get ITC at reduced rate now?
Section 16(1) of CGST Act entitles a registered person to take credit of the input tax charged on his inward supplies, which he uses or intends to use in the course or furtherance of his business, subject to conditions and restrictions which may be prescribed and in the manner provided under section 49 of the CGST Act 2017, which gets credited to his e- credit ledger.
Accordingly, if a registered person receives an inward supply and tax has been duly charged on it, at a rate which is in consonance with the rate prevailing at the time of such supply, the said registered person is entitled to the credit of such tax paid, subject to the other conditions/ restrictions and manner specified in section 49 of the CGST Act 2017.
7. What will be the impact on the IGST rate on import of goods?
The IGST on imported goods will be the GST rates as notified in the rate notification
8. The GST rate has been reduced on my outward supply of goods/services made on or after 22nd September, 2025 but I already have ITC of GST in ledger that accrued on account of higher rate. Can I continue to use such credit?
The input tax credit once duly availed in e-credit ledger can be used for discharge of any output tax liability in terms of provisions of section 49(4) of CGST Act and rules made thereunder.
9. My outward supply is exempt
The ITC can be utilized to discharge outward liability for supplies of goods/services or both made till 21st September, 2025. However, for supplies made on or after i.e 22nd September, 2025 when the rate change is effected, ITC will have to be reversed as per provisions of CGST Act, 2017.
10. Will I be allowed to take refund of accumulated credit arising out of inverted duty structure for supplies effected upto
The said issue has been clarified vide circular No. 135/05/2020-GST dated 31.03.2020 (as amended), which states that refund of accumulated ITC in terms of clause (ii) of first proviso to section 54(3) of the CGST Act, is available where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies. However, the input and output being the same in such cases, though attracting different tax rates at different points in time, do not get covered under the provisions of clause (ii) of the
11. If I already have stock on the date when rate changes come into effect, should I apply the revised rate?
GST is levied on supply. Therefore, on goods supplied on or after the revised GST rates are notified, the new GST rates will be applicable on the outward supplies of goods/services or both.
12. Will the e-way bills have to be cancelled and generated afresh on goods in transit when the new rates come into effect?
As per rule 138 of
13. UHT (Ultra High Temperature) milk has been exempted. Does exemption to UHT milk also cover plant-based milk?
All dairy milk, other than UHT milk, were already
14. What is the reason for 40 per cent rate on ‘other non-alcoholic beverages’?
The principle behind the recent rate rationalisation exercise is to keep similar goods at the same rate to avoid issues of
15. What is the GST rate on food preparations not elsewhere specified in any of the schedules?
Food preparations not elsewhere specified will attract a GST rate of 5 per cent.
16. What is the reason for revising GST rate only on specified varieties of Indian bread?
Bread was already exempt while pizza bread, roti, porotta, paratha etc attracted different rates. All Indian breads, by whatever name called have been exempted even
17. Why has the rate of carbonated beverages of fruit drink or carbonated beverages with fruit juice been increased?
These goods attracted compensation cess in addition to GST. Since it has been decided to end compensation cess levy, the tax has been increased to maintain the pre rate rationalization level of tax.
18. Why is there a different tax treatment between paneer and other cheese?
Prior to rate rationalisation, paneer
19. What is the reason for differential tax treatment for natural honey and artificial honey?
This is intended to promote natural honey.
20. Has the GST on all agriculture machinery
The GST rate on agriculture machinery/equipment such as, sprinklers, drip irrigation system, Agricultural, horticultural or forestry machinery for soil preparation or cultivation; lawn or sports-ground rollers, harvesting or threshing machinery, including straw or fodder balers; grass or hay mowers, other agricultural, horticultural, forestry, poultry-keeping or bee-keeping machinery, composting machines etc, which earlier attracted 12 per cent GST, has now been reduced to 5 per cent.
21. Why has agriculture machinery not been fully exempted?
The objective of the rate rationalisation is to maintain balance between users and producers. While providing relief for the farmers, it is important that the domestic manufacturing does not get adversely impacted. If agriculture machinery is fully exempted, the manufacturers/dealers of these goods would not be able to claim input tax credit on the GST paid on raw materials and will have to reverse the ITC paid on the inputs. This would increase their effective tax incidence and cost of production. This may in turn
22. What is the GST rate on medicines?
All drugs/ medicines have been prescribed a concessional rate of GST of 5 per cent, except those specified at nil rate.
23. Why have all medicines not been exempted from GST in general?
If drugs/ medicines are fully exempted, the manufacturers/dealers would not be able to claim input tax credit on GST paid on raw materials and will have to reverse the ITC paid on the inputs. This would
24. Does the 5 per cent GST rate apply on all medical devices?
The rate of 5 per cent applies on all medical devices, instruments, apparatus used in medical, surgical, dental and veterinary uses other than that are exempted specifically.
25. Why has the GST rate been reduced on medical devices? Will this not
The measure is intended to lower the cost of healthcare and thereby benefit patients, particularly the poor. This measure does not create any new inverted duty structure as the existing structure already had inverted duty structure although this measure may deepen the inversion. However, under GST, refund of accumulated input tax credit arising on account of inverted duty structure is available to manufacturers. GST Council has also recommended process reforms to enable expedited refunds.
26. What is the revised GST rate on small petrol, LPG, CNG, or diesel cars? What is covered under small cars?
The GST rate on all small cars has been reduced from 28 per cent to 18 per cent. For the purposes of GST, small cars means Petrol, LPG, or CNG cars with engine capacity up to 1200 cc and length up to 4000 mm and Diesel cars with engine capacity up to 1500 cc and length up to 4000 mm.
27. What is the new GST rate on vehicles exceeding 1500 cc or length exceeding 4000mm? What is the GST rate on
The GST rate on all mid-size and large cars i.e vehicles exceeding 1500 cc or length exceeding 4000mm is 40 per cent. Further, motor vehicles in the category of Utility Vehicles, by whatever name called including Sports Utility Vehicles (SUV), Multi Utility Vehicles (MUV), Multi-purpose Vehicles (MPV) or Cross-Over Utility Vehicles (XUV), with an engine capacity exceeding 1500 cc, length exceeding 4000 mm, and ground clearance of 170 mm and above, will also attract a GST rate of 40 per cent without any cess.
28. What is the GST rate on 3-wheelers?
The GST rate on three-wheelers classified under HSN 8703 is 18 per cent. It has been reduced from 28 per cent.
29. What is the GST rate on buses and other vehicles meant to carry 10 or more persons, including the driver, such as buses?
All motor vehicles designed to transport ten or more persons, including the driver, and classified under HSN 8702, will attract a GST rate of 18 per cent. It has been reduced from 28 per cent.
30. What is the GST rate
Motor vehicles cleared as ambulances, and duly fitted with all necessary fitments, furniture, and accessories necessary for an ambulance at the time of clearance from the factory will attract a GST rate of 18 per cent. It has been reduced from 28 per cent.
31. What is the GST rate on goods transport vehicles such as lorries and trucks?
Motor vehicles designed for the transport of goods, such as lorries and trucks, classified under HSN 8704 will attract a GST rate of 18 per cent. It has
32. What is the GST rate on trailers and semi-trailers of tractors?
Tractors, other than road tractors for semi-trailers of engine capacity more than 1800 cc, attract a GST rate of 5 per cent. However, road tractors for semi-trailers, with engine capacity more than 1800 cc attract a GST rate of 18 per cent. It has been reduced from 28 per cent.
33. What is the GST rate on motorcycles?
Motorcycles of engine capacity upto 350 cc attract a GST rate of 18 per cent while Motorcycles of
34. GST rate is 18 per cent for motor cycles upto 350cc? Does this include 350cc motor cycles?
The 40 per cent rate is applicable only to motorcycles exceeding 350cc. Therefore the 18 per cent rate also applies to motor cycles of 350cc or lesser than 350cc.
35. Currently mid-size and big cars attract 28 per cent GST and compensation cess ranging from 17-22 per cent with the overall tax incidence ranging from 45-50 per cent. What will be the new rate?
The new GST rate on mid-size and big cars will be 40 per cent with no compensation cess.
36. Has GST rate been reduced on bicycles and parts?
The GST rate has been reduced to 5 per cent on bicycles and its parts from 12 per cent.
37. Why has small agricultural tractors not been fully exempted from GST?
The objective is to provide relief to the farmers while not disincentivising domestic producers. Fully exempting small tractors would be counterproductive. When the rate of tax on any goods is nil, the suppliers cannot claim
38. Why is 40 per cent rate referred to as a ‘special rate’? What is the basis for subjecting goods to special rate?
The special rate is applicable only on few select goods, predominantly on sin goods and few luxury goods and therefore is a special rate. Most of these goods attracted Compensation Cess in addition to GST. Since
39. What is the reason for differential tax rates on wood pulp?
Wood pulp is used for making paper and textiles. The paper chain and the textile chain operate separately. For textiles, the tax treatment is to maintain parity with other textile
40. Why has GST not been removed on raw cotton?
Currently, cotton attracts GST on reverse charge basis. This means that agriculturists do not have to pay GST when they supply raw cotton. The reason for taxing cotton in GST is to avoid breakage in input credit chain and the GST paid on cotton is available as input tax credit for the textile industry. This will ultimately benefit the consumers.
41. For the textile sector, why is the rate not reduced on chemical dyes, plastics, metals, rubber used in
The aim of the rate rationalisation exercise is to correct inversion in the manmade value chain. This is in line with the fibre neutral policy. However, the listed items are multi use goods. Reducing GST on these goods will require an end use-based mechanism which is against the current policy of moving away from end use-based exemptions.
42. Will technical textiles such as geotextiles and agro-textiles
Technical textiles such as geotextiles and agro- textiles are classified as textiles and not plastics by virtue of the Harmonised System of Nomenclature of World Customs Organisation adopted by India. While inversion may deepen, under GST, refund of accumulated credit on account of inverted duty is available. Therefore, accumulated input tax credit gets neutralised by way of refund. The process reform will ensure expedited sanction of the refunds.
43. Why is refund of inverted duty structure on imitation zari made out of metallised plastic film restricted while there is no other restriction on refund on other textile products made from plastic or rubber?
The decision to restrict ITC on the plastic/ polyester film in imitation zari was taken in the 52nd Council meeting. The focus of this GST rate rationalisation exercise has been to streamline GST rates.
44. What is the new GST rate on toilet soap bar? Why has a distinction been kept between
The new GST rate on toilet soap bar is 5 per cent. This is intended to lower the monthly expenditure for the lower middle class and the poorer sections of society.
45. What is the reason for reducing GST on face powder and shampoos? Will this not benefit MNCs and luxury brands?
These goods are daily use items for almost all segments of population. Although expensive face powder and shampoos sold by MNCs or luxury brands will also benefit, the objective of the rate rationalisation exercise is to further
46. Why GST been reduced only on select items such as face powder and shaving cream?
The GST rate has been reduced to 5 per cent only on certain goods that are daily use items for most segments of population.
47. Why has GST not been reduced on mouthwash which is also commonly consumed across households like dental floss?
GST
48. Why has GST rate on coal been increased? Will this not impact electricity cost?
Coal attracted, prior to rate rationalization, 5 per cent GST+ Compensation Cess of Rs 400/ton. The Council has recommended to end Compensation Cess and hence the rate has been merged with GST. There is no additional burden.
49. Has the GST rate on tendu leaves
GST rate on tendu leaves has been reduced to 5 per cent as tobacco leaves are already at 5 per cent. Tendu leaves are also a minor forest produce.
50. What is the GST rate on renewable energy equipment/devices?
The GST rate on renewable energy equipment/devices that were at 12 per cent has been reduced to 5 per cent.
51. Why has the GST rate been reduced on renewable energy equipment /devices? Will this not lead to inverted duty structure?
These goods
52. Why has the GST rate on marble and travertine blocks and granite blocks been reduced?
Earlier, marble and travertine blocks and granite blocks attracted GST rate of 12 per cent. These are in the nature of intermediate goods and GST
53. What is the GST rate on spectacles and goggles (heading 9004)?
Spectacles and goggles for correcting vision now attract 5 per cent GST (reduced from 12 per cent and 18 per cent respectively), while spectacles and other goggles other than for correcting vision continue to attract GST rate of 18 per cent.
54. What is the GST rate on batteries (heading 8507)?
Earlier, lithium-ion batteries attracted 18 per cent GST and other batteries attracted 28 per cent
55. What is the GST rate on Air Conditioners, TVs, monitors and dishwashers?
GST on air conditioners and dishwashers has been reduced from 28 per cent to 18 per cent. Earlier TVs and monitors up to 32 inches earlier attracted 18 per cent GST while larger TVs and monitors attracted 28 per cent GST. Now all TVs and monitors will be uniformly taxed at 18 per cent.
56. Which policies are covered under the ambit of the
The policies covered under the exemption recommended on life insurance are all individual life insurance policies including term, ULIP, and endowment plans and reinsurance services thereof.
57. Which policies are covered under the ambit of the GST exemption recommended on health insurance?
The policies covered under the exemption recommended on health insurance are all individual health insurance policies including family floater plans and senior citizen policies and the
58. Whether the passenger transportation services will be taxed at 18 per cent?
No, the passenger transportation services will be taxed at a merit rate of 5 per cent with no ITC. However, service providers will have the option to charge a standard rate of 18 per cent, which would allow them to claim full ITC.
59. Whether the same option of two rates is available to transport of passenger by air?
No such option is available for transport of passenger by air i.e. if travel is by
60. Whether the rate of 18 per cent is applicable to transportation of goods by GTA?
The transportation of goods by GTA will continue to be taxed at the merit rate of 5 per cent with no ITC. However, the GTA will have the option of charging GST at the standard rate of 18 per cent with full ITC.
61. Whether transportation of goods in containers by Container Train Operator (CTO) will be taxed at 12 per cent?
62. What is the GST rate for transportation of goods by the multi modal transporter?
Multimodal transportation of goods will be taxed at 5 per cent GST with restricted ITC provided no transportation of goods by air is involved. However, where the transportation of goods by air is involved then the rate of GST will be 18 per cent with full ITC.
63. Why not fully exempt GTA services from GST considering the importance of this sector?
When a service is exempt the service provider cannot claim ITC. This adds to their cost and makes the service costlier. Moreover, specific exemptions have already been provided where required such as transport of essential items (B2C) like agricultural produce, milk, etc.
64. What is the recommended GST rate on services by way of job work in relation to pharmaceutical products?
These services will now
65. What is the recommended GST rate on services by way of job work in relation to hides, skins and leather falling under Chapter 41?
The said services will now attract the rate of 5 per cent with ITC. This was earlier taxable at 12 per cent.
66. Whether the rate of 5 per cent recommended for job work in relation to hides, skins and leather also cover job-work in relation to manufacture of leather goods or foot wear falling under Chapter 42 or 64?
No, the said recommendation will not cover job-work in relation to manufacture of leather goods or foot wear falling under Chapter 42 or 64.
67. Whether the job works services in relation to manufacture of alcoholic liquor for human consumption are also recommended to be charged at the lower rate of 5 per cent?
No, the said services will continue to attract a rate of 18 per cent with ITC.
68. What would be the GST rate on residuary job work services?
Residuary job-work services, i.e. those
69. Why not make job work completely tax-free instead of just lowering the rate?
Exempting job work services will break the ITC chain, which increases costs. This is especially relevant for the sectors where multiple layers of job-workers are involved. A lower rate of 5 per cent with ITC, gives full credit benefit for businesses thereby avoiding any cascading of tax.
70. Whether the works contract services relating to oil and gas exploration and production (E&P) in the offshore area will be taxed at 18 per cent?
Yes, the works contract and associated services, in respect of offshore works contact relating to oil and gas exploration and production(E&P) in the offshore area will be taxed at 18 per cent GST.
71. Whether the hotel accommodation services, where the value of supply is up to Rs. 7500 per unit per day, or equivalent, will be taxed at 18 per cent?
No, the said service will attract GST rate of 5 per cent without ITC.
72. What is the recommended GST rate on beauty and physical well-being services? What all will be covered under this rate?
Beauty and physical well-being services including services of health clubs, salons, barbers, fitness centers, yoga, etc. will attract GST rate of 5 per cent without ITC. These services attracted 18 per cent GST earlier.
73. Whether lottery tickets, betting, gambling, horse racing, and casinos attract GST at
Yes, for all specified actionable claims including betting, casinos, gambling, horse racing, lottery and online money gaming, GST rate of 40 per cent will apply.
74. What is the recommended rate of GST on services of admission to sporting events like the IPL?
Admission to sporting events like IPL will attract 40 per cent GST, However, this rate of 40 per cent will not apply to admission to recognized sporting events.
75. What will be the rate of GST on services of admission
Admission to other sporting events including recognised sporting events where the ticket price is not more than Rs. 500 continues to be exempt, and if the ticket price is more than Rs. 500, it continues to be taxed at the standard rate of 18 per cent.
