The new Goods and Services Tax (GST) rates notified by the GST Council have come into effect from September 22, 2025, impacting businesses across sectors.
To comply with the revised rates, GST-registered taxpayers need to update their accounting software and ERP systems. This article provides a detailed step-by-step guide using Tally as an example, explains how to manage bulk updates, clarifies “time of supply” rules, and highlights exemptions on life and health insurance policies. Why You Need to Update Your GST Software Immediately With the revised GST rates now applicable, businesses must ensure their invoicing, ledgers, and GST returns reflect the correct tax rates. Using outdated rates can lead to compliance issues, penalties, and errors in Input Tax Credit (ITC) claims. Chartered Accountant Akhil Pachori highlighted that updating software is a simple but crucial task. Similarly, Nabendu Das, Chief of Engineering and Product, Tally Solutions, told ET Wealth Online that the changes must be made at multiple levels, company, ledger, and item groups, to ensure accuracy across transactions. Step-by-Step Guide to Updating GST Rates in Your Software (Tally Example)
- Open GST Rate Setup Report
- Navigate to the GST Rate Setup section in your software.
- Select the Relevant Masters
- Choose the master records (items, item groups, ledgers, or ledger groups) where tax changes are required.
- These are typically auto-grouped by tax rates for convenience.
- Update New Tax Rate with Effective Date
- Example: Change the rate from 12% to 5%.
- Set the effective date as September 22, 2025.
- This step can be executed in bulk for multiple items.
- Transaction Handling
- All invoices generated on or after 22nd September will automatically reflect the revised rates.
- For backdated entries (before 22nd September), the old rates will continue to apply.
- Error Correction
- If old rates are mistakenly applied in transactions after 22nd September, corrective actions can be taken through invoice amendments, debit notes, or credit notes.
It is more efficient to update GST rates at ledger group or stock group level, reducing the need for item-by-item modifications.
Key Aspects of GST Rate Changes
- Effective Date: September 22, 2025
- Nature of Change: Revised GST rates for multiple goods and services, aimed at simplification and removal of anomalies.
- Registration Threshold: No change; only rates are revised.
- Notifications: All official GST rate notifications are available on the CBIC website.
Frequently Asked Questions (FAQs) on GST Rate Change
1. When did the new GST rates take effect?
From 22nd September 2025, as per GST Council recommendations.
2. What happens if goods were supplied before the rate change but invoiced later?
- If supply and payment were completed before September 22 → old rate applies.
- If supply was before but invoice/payment after September 22 → new rate applies
3. How are advances treated?
- Advances received before September 22 → taxed at old rate.
- Advances received on/after September 22 → taxed at new rate.
4. Do I need to reissue e-way bills for goods already in transit?
No. Existing valid e-way bills remain valid even after the rate change.
5. How will stock held before the rate change be treated?
Any supply made on/after September 22 will attract the new rate, regardless of purchase date.
6. What happens to Input Tax Credit (ITC)?
- ITC on past purchases remains valid at the old rate.
- No reduction in credit due to the rate revision.
- Supplies made up to 21st September 2025 → ITC usable.
- Supplies made on/after 22nd September 2025 → ITC must be reversed for exempt supplies.
8. Will I get a refund for accumulated ITC under inverted duty structure?
No refund is allowed if the difference arises purely due to a rate change over time.
GST Exemptions on Insurance Policies
- Life Insurance Policies:
Term plans, endowment policies, and ULIPs are exempt. Reinsurance of these policies is also covered. - Health Insurance Policies:
Individual health insurance (including family floater and senior citizen plans) is exempt. Reinsurance of such policies also falls under exemption.
The GST rate revisions effective from September 22, 2025 are a significant compliance event for businesses. Updating your accounting software such as Tally, Zoho Books, QuickBooks, or SAP is essential to avoid compliance risks, wrong invoicing, and disputes in ITC claims.
By following the step-by-step process outlined above, taxpayers can seamlessly implement the new GST rates and stay compliant with the revised framework.
