GST Council Meet: Finance Ministry releases FAQs on new rate structure, implementation date

The Government of India has rolled out sweeping reforms under its “Next-Generation GST” initiative, designed to ease the burden on small businesses and reduce taxes on everyday essentials.

Finance Minister Nirmala Sitharaman announced that the existing four-slab GST structure has been streamlined into two core rates—5% and 18%—with a special 40% slab for sin goods such as tobacco and select luxury items.

To address common concerns, the Finance Ministry released the following FAQs on the new GST rates:

1. 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—cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and beedi—the existing rates of GST and compensation cess will continue to apply. The new rates will be implemented later, once all loan and interest liabilities under the compensation cess account are discharged.

2. Is there any change in threshold of the registration required for goods under CGST Act, 2017?

No, there is no change in the registration threshold under the CGST Act, 2017.

3. Which notification provides for the revised rates?

The revised GST rates will be notified separately. Notifications will be placed on the CBIC website.

4. What happens if goods/services were supplied before the rate change, but invoices issued later?

As per Section 14(a)(i) of the CGST Act, 2017:

If payment is received after the rate change → the time of supply is the earlier of payment receipt or invoice issue.

If payment is received before the rate change → the time of supply is the payment date.

5. What if advances were received but supply or invoice not completed?

The GST rate will be determined as per time of supply rules in Section 14 of the CGST Act.

6. What about ITC on purchases made before the rate change?

Section 16(1) of the CGST Act entitles registered persons to claim ITC on inward supplies at the rate prevailing at the time of supply, subject to conditions and restrictions.

7. What will be the impact on IGST for imports?

IGST on imports will apply as per the revised GST rates, unless separately exempted.

8. If my outward supply rate is reduced but I already hold ITC at a higher rate, can I still use it?

Yes. Once credited, ITC can be used for any output liability as per Section 49(4) of the CGST Act.

9. If my supply becomes exempt under the new rates but I hold ITC, do I need to reverse it?

ITC can be used until 21st September 2025. From 22nd September 2025, reversal is required under CGST Act provisions.

10. Can refund of accumulated ITC be claimed for inverted duty structure before rate changes?

No. As clarified in Circular No. 135/05/2020-GST (as amended), refunds are not allowed when input and output are the same items taxed at different times, even at different rates.