GST 2.0 Effective Today September 22: Check FAQs from GST Rate Reforms Across Sectors

Starting September 22, 2025, India will witness significant Goods and Services Tax (GST) rate reductions and exemptions, following key decisions made by the GST Council. These changes, officially notified through CBIC circulars and rate notifications, are aimed at streamlining the GST framework, resolving anomalies, and enhancing compliance efficiency for both businesses and consumers.

To help stakeholders navigate this transition smoothly, here’s a comprehensive FAQ covering the revised GST rates, exemptions, ITC treatment, invoicing, and compliance norms under the new structure.

What is GST?

GST (Goods and Services Tax) is a unified indirect tax on the supply of goods and services in India. It replaced multiple levies such as excise duty, VAT, and service tax to create a single, integrated market.

When do the new GST rates take effect?

The revised GST rates come into effect from 22 September 2025, based on the recommendations of the GST Council.

What exactly is changing?

The reform includes rate reductions and exemptions across various sectors to simplify compliance, eliminate classification disputes, and make the tax system more business- and consumer-friendly.

Do GST registration rules change?

No. Registration thresholds remain unchanged. The changes apply only to GST rates, not to registration criteria.

Where are these changes notified?

All amendments are officially notified via CBIC notifications, available on the CBIC website.

How is the applicable GST rate determined when the supply and invoice/payment dates span the change?

Under Section 14 of the CGST Act, the "time of supply" determines the applicable tax rate.

• If both supply and payment occurred before 22nd Sept, the old rate applies.
• If supply was made before, but invoice or payment comes after 22nd Sept, the new rate is applicable.

What if an advance was received before the change?

Advances received before 22nd September will be taxed at the old rate. If received on or after, the revised rate applies.

Do e-way bills need reissuance for goods in transit during the changeover?

No. Existing e-way bills remain valid and need not be reissued for goods in transit as of 22nd September.

Should revised GST rates be applied to old stock held before the change?

Yes. GST is levied based on date of supply, not date of procurement. Supplies made on or after 22nd September must reflect the revised rates, even for older stock.

Is ITC impacted by the rate change?

No. Full ITC remains available on inputs procured before the change, provided GST was properly charged at the time. Rate changes do not retroactively reduce ITC.

What if my supply becomes exempt under the new regime but I have ITC in my ledger?

You may use ITC for supplies made up to 21st September. From 22nd September onwards, if the output is exempt, ITC must be reversed for such supplies.

Can I claim a refund of accumulated credit under inverted duty structure before the rate change?

No. Refunds are not permitted if the inversion arises solely due to a rate revision. They are only allowed when inputs are permanently taxed higher than outputs.

Which life insurance policies are now exempt?

All individual policies, including term plans, ULIPs, and endowment policies. are GST-exempt. Reinsurance for these policies is also exempt.

Are health insurance policies exempt too?

Yes. Individual health policies, including family floater and senior citizen plans, are exempt. Reinsurance of such policies is also GST-free.

Are insurer-input services also exempt?

Only reinsurance is exempt. Other input services (e.g., commissions, brokerage) remain taxable, and ITC must be reversed when the output supply is exempt.

Will GST on passenger transport increase to 18%?

No. Passenger transport by road remains at 5% without ITC. Operators can opt for 18% with ITC. Air travel in economy class is taxed at 5%, while other classes are at 18%.

Why are medicines not fully exempted?

Zero-rating medicines would block ITC on inputs, increasing production costs and retail prices. A concessional 5% rate ensures both affordability and ITC flow.

Conclusion

The implications of the revised GST structure, helping businesses, professionals, and consumers adjust to the changes effectively. The above-mentioned FAQs clears the picture of different stakeholders.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.