The 56th GST Council meeting, held in New Delhi on 3rd September 2025, introduced a landmark restructuring of GST rates across goods and services. To address common concerns, the government has released a set of Frequently Asked Questions (FAQs) that provide clarity on the applicability of new rates, input tax credit (ITC), transitional provisions, and sector-specific impacts.
Key Highlights from the FAQs
1. Effective Date of New GST Rates
The revised GST rates will apply from 22nd September 2025, except for sin goods like cigarettes, chewing tobacco, unmanufactured tobacco, and beedis. For these, current rates continue until outstanding compensation cess loans and interest are settled.
2. Registration Thresholds
There is no change in the registration threshold under the CGST Act for suppliers of goods.
3. Transitional Provisions – Supply, Advances, and ITC
- Supplies made before the rate change but invoiced later will be taxed as per time of supply rules (Section 14, CGST Act).
- Advances received before 22nd September 2025 will be taxed at old rates, while supplies made post-change will attract revised rates.
- ITC already availed at higher rates can still be utilized, but where supplies turn exempt post-change, ITC reversal will be required.
- Refunds of accumulated ITC are not admissible in cases where the rate change is due to rationalisation but inputs and outputs remain the same.
4. Imports and IGST
Imported goods will be subject to revised rates under the new GST notifications, unless specifically exempt.
5. Clarifications on Goods
- Milk & Plant-based Milk: UHT milk is exempted; plant-based and soya milk drinks now taxed at 5%.
- Agricultural Machinery: Rates reduced from 12% to 5%, balancing farmer relief with protection of domestic manufacturers.
- Medicines & Medical Devices: Uniform concessional rate of 5% applies to medicines and most devices, aimed at reducing healthcare costs.
- Automobiles:
- Small cars – reduced to 18%.
- Mid-size/large cars & SUVs – taxed at 40% (without cess).
- Motorcycles up to 350cc – 18%; above 350cc – 40%.
- Buses, ambulances, and goods vehicles – 18% (down from 28%).
- Daily-use Goods: Toilet soap bars, shampoos, shaving creams, toothpaste, and toothbrushes are now taxed at 5% to ease burden on households.
- Luxury & Sin Goods: Carbonated fruit beverages, online gaming, betting, casinos, and admission to IPL-like sporting events attract a special 40% rate.
6. Renewable Energy & Green Push
GST on renewable energy equipment has been cut from 12% to 5%, with refund mechanisms to neutralize inverted duty. This step is designed to boost clean energy adoption.
7. Services Sector
- Passenger Transport: Road transport services remain at 5% without ITC (option to pay 18% with ITC).
- Goods Transport Agency (GTA): Option to choose 5% (no ITC) or 18% (with ITC).
- Job Work: For pharmaceuticals, hides, and leather (Chapter 41) reduced to 5% with ITC; residuary job work now 18%.
- Beauty & Wellness: Salons, gyms, yoga centers, and spas now taxed at 5% (earlier 18%).
- Insurance: All individual life and health insurance policies, including ULIPs and family floaters, are exempted from GST.
8. Sporting Events and Entertainment
- IPL and similar events – 40% GST.
- Recognized sporting events – exempt up to ₹500 ticket value, otherwise 18%.
Conclusion
The 56th GST Council meeting is one of the most significant reforms since GST’s introduction. By reducing rates on essential goods, healthcare, agriculture machinery, and transport while streamlining the taxation of luxury and sin goods, the Council has aimed to make GST more equitable and transparent. The FAQs further provide operational clarity to taxpayers on transitional provisions, ITC, exemptions, and new rate applicability.
With implementation from 22nd September 2025, businesses and consumers alike must adapt to these changes, which are expected to simplify compliance, reduce litigation, and align GST with broader socio-economic priorities.
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