Indirect Taxation

October 2025

Frequently Asked Questions (FAQs) on the 56th GST Council Meeting

Based on the recommendations of the 56th GST Council meeting held on September 03, 2025, the CBIC has issued crucial FAQs clarifying the new tax structure. The revised rates, effective from September 22, 2025, aim to simplify the tax regime and rationalise rates across sectors.

Key changes include a significant reduction in GST rates on numerous items. Common use products like toilet soap, shampoo and toothpaste are now taxed at 5%. The healthcare sector sees relief with medicines and medical devices attracting a 5% rate. To boost infrastructure and agriculture, rates on renewable energy devices, agricultural machinery, and bicycle parts have been reduced to 5%. The automotive sector undergoes a major overhaul, with small cars, buses, trucks and two-wheelers up to 350cc moving to an 18% slab, while large cars and powerful motorcycles will attract a higher 40% rate.

For services, life and health insurance premiums are exempt from GST. Passenger transport and hotel accommodation (below ₹7,500) will have a 5% rate, with an option to choose 18% for input tax credit. A uniform 40% rate applies to actionable claims like gambling, casinos and lottery tickets.

The FAQs clarify that the new rates apply to supplies made on or after the effective date. Existing input tax credit accrued at higher rates can be utilised for future liabilities, though credits must be reversed if the outward supply becomes exempt. The changes also resolve issues of inverted duty structures while maintaining the input credit chain to avoid cascading taxes.

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 the new rates will be implemented at a later date to be notified, based on the discharging of entire loan and interest liabilities on account of compensation cess.
Is there any change in the threshold of registration required for goods under the CGST Act, 2017?
No, there is no change in the threshold of registration required for goods under CGST Act, 2017.
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 the CBIC website.
What happens to the applicable rate of tax, if I had supplied goods/services or both before the changes in GST rates came 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:
1. If the payment is received after the change in the rate of tax, then time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier.
2. 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.
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 has not been issued?
The GST rate will be determined as per the time of supply provisions. (Refer Section 14 of the CGST Act, 2017).
What will happen to the ITC for purchases made before changes in GST rates came into effect’ Will I get ITC at a 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.
What will be the impact on the IGST rate on the import of goods?
The IGST on imported goods will be the GST rates as notified in the rate notification, except where IGST rate has been exempted separately.
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 the ledger that accrued on account of higher rate. Can I continue to use such credit?
The input tax credit, once duly availed in the 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.
My outward supply is exempt under the new rate schedule. But I already have ITC of GST paid in my ledger. Will I need to reverse ITC?
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 the provisions of CGST Act, 2017.
Will I be allowed to take a refund of accumulated credit arising out of inverted duty structure for supplies effected up to the date of effect of revised rate as notified?
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 first proviso to sub-section (3) of section 54 of the CGST Act.
If I already have stock on the date when the 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.
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 CGST Rules, 2017 the e-way bill is to be generated before the start of supply/transport of goods. There is no mandatory requirement for cancellation and fresh generation of e-way bills for goods in transit when the new rates come into effect. E-way bills currently in transit will continue to remain valid as per their original validity period.
UHT (Ultra High Temperature) milk has been exempted. Does the exemption to UHT milk also cover plant-based milk?
All dairy milk, other than UHT milk, was already exempt from GST. Hence, UHT milk has been exempted to provide the same tax treatment to similar goods. Plant-based milk drinks, except soya milk drinks, attracted 18% GST while soya milk drinks attracted 12% GST. The GST rate on plant-based milk drinks and soya milk drinks has now been reduced to 5%.

Indirect Taxation

October 2025

Frequently Asked Questions (FAQs) on the 56th GST Council Meeting

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