New GST rates to come into effect from Sept 22: Your top questions answered

The GST Council's 56th meeting has notified sweeping changes effective September 22, impacting goods and services from milk and medicines to cars, coal and casinos

From medicines and milk to cars, soaps, and even IPL tickets, the GST Council’s latest rate rationalisation reshapes how consumers and businesses will pay tax from September 22. While some essentials get cheaper with cuts to 5 per cent, luxury and sin goods will see steeper levies of up to 40 per cent. 

 

To clear doubts, the government has issued a detailed set of FAQs explaining how the new rates apply across goods, services, and sectors.

 

When will the new rates start?

 

The revised rates on most goods and services apply from September 22, 2025. For cigarettes, chewing tobacco, zarda, unmanufactured tobacco, and beedis, the existing rates and cess continue until pending compensation cess loans are repaid.

 

Has the registration threshold changed?

 

No, the registration limits under the CGST Act, 2017 remain unchanged.

 

Where will the revised rates be notified?

 

They will be notified on the CBIC website through official rate notifications.

 

What if goods or services were supplied before the change but invoiced later?

 

The rate depends on the time of supply rules:

 

• If payment is after the change, the rate applies on invoice/payment date (whichever is earlier).
• If payment is before the change, the rate applies on the payment date.

 

What happens to advances received before the change?

 

GST will be determined as per time of supply provisions.

 

What about Input Tax Credit (ITC) on old purchases?

 

ITC can still be claimed if tax was correctly charged at the time of purchase, subject to CGST Act conditions.

 

What about imports?

 

IGST on imports will follow the new notified rates, unless exempted.

 

Can ITC from old higher rates still be used?

 

Yes. ITC in your ledger remains valid for future tax liabilities.

 

What if my supply becomes exempt after September 22?

 

ITC can be used for supplies made before the date. Afterward, ITC must be reversed.

 

Can refund be claimed for inverted duty?

 

Refunds are not available if inputs and outputs are the same goods taxed at different times.

 

How will stock held on September 22 be taxed?

 

The new rate applies at the time of supply, not when stock was purchased.

 

Do e-way bills need to be re-generated?

 

No. Existing e-way bills remain valid until expiry. 

Also Read | GST 2.0: What gets cheaper, what gets expensive

New GST rate list: Sector wise

 

Food and beverages

 

• UHT milk is now exempt; plant-based and soya milk drinks taxed at 5%.
• Other non-alcoholic beverages taxed at 40% to avoid classification disputes.
• Indian breads like roti, paratha, porotta now fully exempt.
• Carbonated fruit drinks taxed higher as cess has been merged with GST.
• Paneer (unpackaged) remains exempt; packaged paneer taxed separately to support small producers.
• Natural honey promoted with lower tax compared to artificial honey.
• Food preparations not elsewhere specified taxed at 5%.

 

Agriculture

 

• Agricultural machinery (sprinklers, harvesters, drip irrigation, mowers, compost machines, etc.) taxed at 5% (down from 12%).
• Not exempted fully to protect domestic manufacturers’ ITC and avoid higher costs for farmers.

 

Healthcare

 

• Medicines: Most drugs taxed at 5%, except those already at nil rate.
• Medical devices: Now at 5% to lower healthcare costs. Refunds for inverted duty will be expedited.

 

Automobiles

 

• Small cars: 18% (earlier 28%) - Petrol, LPG, or CNG cars with engine capacity up to 1200 cc and length up to 4000 mm and Diesel cars with engine capacity up to 1500 cc and length up to 4000 mm
• Mid-sized and large cars: 40% without cess - vehicles exceeding 1500 cc or length exceeding 4000 mm
• Three-wheelers: 18% (earlier 28%).
• Buses and vehicles carrying 10+ persons: 18% (earlier 28%).
• Ambulances: 18% (earlier 28%).
• Goods transport vehicles (trucks, lorries): 18% (earlier 28%).
• Tractors: Small tractors 5%; large road tractors over 1800cc, 18%.
• Motorcycles: Up to 350cc at 18%; above 350cc at 40%.
• Bicycles: 5% (earlier 12%).

 

Industry and energy

 

• Coal: Compensation cess merged into GST; no extra burden.
• Renewable energy equipment: Reduced to 5% to encourage adoption; refunds available for inverted duty.
• Marble, granite, travertine blocks: Reduced to 5% (earlier 12%).
• Batteries: Unified at 18% for all types.
• Air conditioners, dishwashers, TVs, monitors: All reduced to 18% (earlier up to 28%).

 

Consumer goods

 

• Toilet soap bars: Reduced to 5%.
• Face powder, shampoos, shaving cream: Reduced to 5%.
• Toothpaste, toothbrushes, dental floss: Reduced to 5%.
• Mouthwash remains unchanged.

 

Insurance and services

 

• Life insurance policies: All individual life policies (term, ULIP, endowment) exempt.
• Health insurance policies: All individual/family floater/senior citizen policies exempt.
• Passenger transport by road: 5% without ITC, or optional 18% with ITC.
• Passenger air travel: Economy at 5%, others at 18%.
• Goods transport by GTA: 5% without ITC or optional 18% with ITC.
• Container Train Operator (CTO): 5% without ITC or 18% with ITC.
• Multimodal transport: 5% with restricted ITC, except air (then 18%).

 

Job work and contracts

 

• Pharma and leather job work: 5% with ITC (earlier 12%).
• Leather goods/footwear job work: Not covered; remains higher.
• Alcoholic liquor job work: 18% with ITC.
• Other job work services: 18% (earlier 12%).
• Job work not exempt to avoid breaking ITC chain.
• Works contracts for oil & gas offshore exploration: 18%.
• Hospitality, wellness and entertainment
• Hotels below ₹7,500/day: 5% without ITC.
• Beauty, wellness, yoga, salons, gyms: 5% without ITC (earlier 18%).
• Casinos, betting, gambling, horse racing, online money gaming: 40%.
• IPL tickets: 40%; but recognised sporting events exempt if ticket below ₹500, or 18% if above.