GST Rate Changes: Comprehensive FAQs from the 56th GST Council Meeting
Based on the recommendations of the 56th GST Council meeting held on September 3, 2025, the CBIC has released a comprehensive set of FAQs to clarify the new GST rates, effective from September 22, 2025. These changes are designed to simplify the tax regime, provide relief to the common person, and facilitate trade.
Key Highlights of the GST Rate Rationalization
- Consumer Goods & Healthcare: The GST rate has been significantly reduced to 5% on a wide range of common use products like toilet soap, shampoo, and toothpaste. Medicines and most medical devices also now attract a concessional rate of 5%.
- Infrastructure & Agriculture: To boost these vital sectors, GST on renewable energy devices, agricultural machinery, and bicycle parts has been cut to 5%.
- Automotive Sector: A major overhaul has been announced. Small cars, buses, trucks, and two-wheelers up to 350cc are now in the 18% slab. In contrast, large cars and powerful motorcycles will attract a higher 40% rate, with no additional compensation cess.
- Services:
- Insurance Premiums: Life and health insurance premiums are now exempt from GST.
- Passenger Transport & Hotels: These services will be taxed at a ‘merit rate’ of 5% (without ITC) with an option to pay 18% (with full ITC).
- Actionable Claims: A uniform 40% rate applies to actionable claims like gambling, casinos, and lotteries.
Frequently Asked Questions (FAQs)
1. When do the new GST rates come into force?
2. The new rates for most goods and services will be effective from September 22, 2025. For certain products like cigarettes and chewing tobacco, the existing rates will continue until further notification.
3. Is there a change in the registration threshold for goods?
4. No, the threshold for goods registration under the CGST Act, 2017 remains unchanged.
5. What happens if I supplied goods before the rate change but issued the invoice later?
6. According to Section 14(a)(i) of the CGST Act, 2017, the time of supply will be the date of payment or the date of invoice issue, whichever is earlier, if the payment is received after the rate change. If payment was received before the change, the time of supply is the date of receipt of payment.
7. Can I use my existing ITC accrued at a higher rate?
8. Yes, input tax credit that was properly availed can be used to pay for any future output tax liability.
9. Do I need to reverse my ITC if my outward supply becomes exempt?
10. Yes, if your outward supply becomes exempt on or after September 22, 2025, you will need to reverse the associated ITC as per the provisions of the CGST Act.
11. What is the new GST rate on small cars and utility vehicles?
12. The GST rate on all small cars has been reduced to 18%. This includes petrol, LPG, or CNG cars with an engine capacity up to 1200cc and a length up to 4000mm, and diesel cars with an engine capacity up to 1500cc and a length up to 4000mm. Utility vehicles (SUVs, MUVs, etc.) with an engine capacity exceeding 1500cc and a length over 4000mm will now attract a 40% GST rate.
13. What is the GST rate on buses and trucks?
14. Both motor vehicles designed to transport ten or more people (buses) and goods transport vehicles (lorries and trucks) will now be taxed at an 18% GST rate.
15. Why have the rates on renewable energy equipment and agriculture machinery been reduced, and will this cause an inverted duty structure?
16. The rate reduction is intended to promote these sectors. While this may deepen the inverted duty structure, the government confirms that a refund mechanism for accumulated ITC is available, and process reforms are being put in place to ensure quick refunds.
17. Why are all medicines not exempted from GST?
18. If medicines were fully exempted, manufacturers would not be able to claim ITC on raw materials. This would increase their production costs, which could then be passed on to consumers, making the medicines more expensive. A lower rate of 5% with ITC ensures the benefit is passed on to the consumer.
19. Is there a change in the GST rate on Air Conditioners, TVs, and monitors?
20. Yes, the GST rate on air conditioners and dishwashers has been reduced from 28% to 18%. All TVs and monitors, regardless of size, will also now be uniformly taxed at 18%.
21. Why is there a special rate of 40% on certain goods?
22. The 40% “special rate” applies to select luxury and ‘sin’ goods. It is a merger of the previous GST rate (28%) and the Compensation Cess, maintaining the pre-rationalization tax burden while phasing out the cess.
23. Is there a change in the GST rate on beauty and physical well-being services?
24. Yes, services from health clubs, salons, barbers, fitness centers, and yoga centers will now attract a 5% GST rate without ITC.
25. What is the new GST rate on lottery tickets and casinos?
All specified actionable claims, including betting, casinos, gambling, horse racing, lottery, and online money gaming, will be subject to a 40% GST rate.