GST rate changes from September 22, implementation in a phased manner; check timeline

The Goods and Services Tax (GST) Council, chaired by Union Finance Minister Nirmala Sitharaman, has approved the implementation of revised GST rates on goods and services beginning September 22, 2025. The move is part of the government’s broader effort to rationalise the indirect tax structure, reduce compliance burden, and extend relief to households, businesses, and the middle class.

The Council has decided that the rate changes will be rolled out in a phased manner to ensure stability in revenue flows, particularly with respect to commitments under the compensation cess account.

Under the new schedule, GST rate changes on services will come into effect from September 22. Likewise, all goods—barring certain sin products such as pan masala, gutkha, cigarettes, chewing tobacco, zarda, unmanufactured tobacco, and bidis—will also shift to the new slabs from the same date.

However, these sin goods will continue to be taxed at existing GST and compensation cess rates until the Centre clears outstanding loan and interest obligations tied to the compensation cess account. The actual date of transition for these products will be notified later by the Finance Minister, who also chairs the Council.

Services: Revised GST rates will come into effect from September 22, 2025.

Goods (excluding tobacco and allied products): New rates will also apply starting September 22, 2025.

Tobacco and related products: Current GST and cess rates will remain in force until all loan and interest obligations under the compensation cess account are cleared. The Union Finance Minister will announce the transition date for these items at a later stage

On Wednesday, FM Nirmala Sitharaman announced that the compensation cess will now apply only to tobacco and related products, levied over and above the 28% GST rate until all pending loan repayments are cleared.

She clarified that the cess will be withdrawn once repayments are complete, adding that the proposed 40% levy on sin goods is not part of the standard GST framework and will apply solely to tobacco products.

In addition to rate restructuring, the Council approved administrative changes aimed at streamlining refunds under the inverted duty structure. Pending amendments to the CGST Act, the Central Board of Indirect Taxes and Customs (CBIC) will begin implementing a new system to grant 90% provisional refunds based on data analytics and risk evaluation. This system mirrors the framework already used for zero-rated supplies and is expected to ease liquidity pressure on businesses.

The phased implementation reflects a balancing act—delivering immediate relief to consumers and industries while safeguarding fiscal needs. By sequencing changes, the government hopes to prevent revenue shocks while fulfilling its reform promise of a simpler, more predictable GST framework.