GST 2.0 Arrives! 9 Fresh Notifications Bringing Major Changes from September 22

The Central Board of Indirect Taxes and Customs (CBIC) has released a series of Central Tax (Rate) Notifications on 17th September 2025 to implement the decisions of the 56th GST Council meeting. These notifications primarily deal with GST rate changes and amendments to earlier notifications. All changes are effective from 22nd September 2025.

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 Key Highlights of Notifications

1. 09/2025 & 10/2025: Supersede the original 2017 rate and exemption notifications, thereby consolidating all GST rates under the new GST 2.0 regime.
2. 11/2025 & 17/2025: Amendments to Notification 3/2017 (concessional rate supplies for exploration and production).
3. 12/2025 & 16/2025: Amendments to Notification 12/2017 (service exemptions).
4. 15/2025: Amends Notification 11/2017 relating to GST rates for services.
5. 13/2025 & 12/2025: Amendments to notifications relating to concessional GST on handicraft items and earlier changes to service rates.
6. 14/2025: Notifies revised GST rate for bricks, in line with the Council’s decision (sand lime bricks reduced to 5%).

GST 2.0. Central Tax (Rate) Notifications

 Conclusion

These notifications mark the implementation of GST 2.0, simplifying rate structures and clarifying exemptions. Businesses must now:

• Update billing and ERP systems with revised rates effective 22nd September 2025.
• Review service contracts and supply chains impacted by amended exemption/rate notifications.
• Pay close attention to transitional compliance, especially for goods like bricks, handicraft items, pharma products, and services under concessional/exempt categories.

Together, these changes give legal effect to the recommendations of the 56th GST Council and begin a new phase of GST compliance in India.

Notification No. 09/2025–CT (Rate): Major GST Rate Changes Effective 22 September 2025

The 56th GST Council meeting held on 3rd September 2025 introduced a landmark set of changes that are being popularly referred to as GST 2.0.

To implement these decisions, the Central Government issued a series of Gazette Notifications on 17th September 2025, which come into force from 22nd September 2025. The most important of these are:

• Notification No. 09/2025 – Central Tax (Rate): Prescribes revised GST rate schedules.
• Notifications No. 36/2025, 37/2025, 38/2025 – Customs: Align Customs exemptions and duties with GST Council recommendations.

New GST FAQ on Rate Changes (Effective 22.09.2025) Released on 16 September

The GST Council, in its 56th meeting held on 3rd September 2025, along with subsequent circulars and clarifications, has brought several important changes impacting businesses, service providers, and consumers. The National Pharmaceutical Pricing Authority (NPPA) and the GST Council have issued detailed guidelines on GST rates, exemptions, and compliance procedures. Below is a simplified breakdown of the key points.

1. Medicines & Medical Devices – Revised MRP Implementation

• All drug manufacturers/marketers must revise the Maximum Retail Price (MRP) of medicines and devices to reflect revised GST rates.
• A revised/supplementary price list (Form V/VI) must be issued to dealers, retailers, State Drug Controllers, and the Government.
• Re-labelling or recalling old stock (before 22nd Sept 2025) is not mandatory, provided compliance is ensured at the retailer level.

2. GST on Drones

• Previously, drones attracted different GST rates depending on usage (5%, 18%, or 28%).
• Now, a uniform 5% GST applies to all drones, irrespective of type or use.

3. GST on Bricks

• Under the Special Composition Scheme (from April 2022):
  • Bricks attract 6% GST without ITC or 12% with ITC (threshold ₹20 lakhs).
• No major change in Sept 2025, except:
  • Sand lime bricks – GST rate reduced from 12% to 5%.

4. Life & Health Insurance Services

• Individual life and health insurance policies (including for family) are exempt from GST.
• Reinsurance services for such policies are also exempted.
• Other inputs (like brokerage/commission) – ITC to be reversed since output is exempt.

5. Hotel Accommodation Services

• For rooms costing ≤ ₹7,500/day:
  • GST is 5% without ITC (mandatory).
  • Hotels cannot opt for 18% with ITC on such rooms.

6. Beauty & Wellness Services

• Attract 5% GST without ITC (mandatory).
• Service providers cannot opt for 18% with ITC.

7. Input Tax Credit (ITC) Rules for 5% without ITC Supplies

• ITC cannot be taken for goods/services exclusively used for such supplies.
• For mixed-use inputs, proportionate ITC reversal is required under Section 17(2) of CGST Act.

8. Job Work Services

• Bus body building – 18% with ITC.
• Bricks job work – 5% with ITC (where output bricks attract 5%).

9. Multimodal Transportation of Goods

• Without air transport: 5% GST with restricted ITC (limited to 5% of value of transport input services).
• With air transport involved: 18% GST with full ITC.

10. Local Delivery Services via E-Commerce Operators (ECOs)

• Covered under Section 9(5) CGST Act.
• GST @18% applicable:
  • If supplied by unregistered person via ECO → ECO pays GST.
  • If supplied by registered person via ECO → Supplier pays GST.
• ECO-provided delivery services are not treated as GTA (Goods Transport Agency).

11. Leasing & Renting Services

• Without operator → taxed at same rate as supply of like goods.
• With operator (e.g., car + driver) → option of:
  • 5% with ITC on input services of same line, OR
  • 18% with full ITC.

GST Update: CBIC Issues Clarification on Post-Sale Discounts (Circular No. 251/08/2025)

On 12th September 2025, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 251/08/2025-GST to address long-standing doubts on the GST treatment of secondary or post-sale discounts. The clarification aims to bring uniformity in practice across taxpayers, dealers, and field formations.

Click here to Download Circular

 Key Issues Addressed in the Circular

1. Input Tax Credit (ITC) & Financial/Commercial Credit Notes

• Many suppliers issue financial or commercial credit notes after sales, reducing the amount payable by the buyer.
• Earlier, there was confusion if the recipient should reverse ITC in such cases.
• Clarification:
  • Supplier issuing a financial/ commercial credit note cannot reduce their original tax liability.
  • Since the tax charged originally remains unchanged, recipient is not required to reverse ITC.
  • Example: If goods worth ₹1,00,000 + GST ₹18,000 were sold, and later supplier issues a ₹10,000 commercial credit note, the GST still applies on ₹1,00,000. Buyer keeps full ITC of ₹18,000.

2. Post-Sale Discounts & Consideration

• Question: If a manufacturer gives a discount to a dealer, can it be treated as “consideration” for the dealer’s sale to the end customer?
• Clarification:
  • Normally, the manufacturer sells to the dealer, and the dealer sells to the customer — these are two independent principal-to-principal transactions.
  • A discount given by the manufacturer simply reduces the dealer’s purchase price, helping competitive pricing. It is not an inducement and hence not “consideration”.
  • Exception: If the manufacturer has a direct agreement with the end customer to sell at a discounted price, and instructs the dealer accordingly, then such a discount is treated as part of the consideration (since it influences the supply to the end consumer).

3. Post-Sale Discounts vs. Promotional Services

• Dealers sometimes undertake promotional activities after receiving discounts.
• Clarification:
  • If these activities are incidental (e.g., boosting their own sales), the discount is simply a reduction in sale price, not payment for services.
  • However, if there is a specific agreement where the dealer provides services like:
    • Advertising campaigns
    • Co-branding
    • Special sales drives
    • Customer support
    • Exhibitions or events
    • Customization/branding services
      then these are independent supplies of service and GST will apply on the consideration received for such services.

 Practical Impact of This Circular

1. For Dealers/Distributors
   • Can continue to avail full ITC even when receiving post-sale discounts via financial/ commercial credit notes.
   • No ITC reversal required unless linked with a formal agreement involving promotional services.
2. For Manufacturers
   • Discounts given for competitive pricing will not attract GST as “consideration”.
   • But if discount is tied to a specific end-customer agreement or services rendered by dealer, GST may apply.
3. For Auditors & Tax Professionals
   • Important to check agreements carefully — whether a discount is just commercial in nature or tied to service obligations.
   • This distinction affects GST liability significantly.

Conclusion

The new Circular No. 251/08/2025-GST clears a long-pending ambiguity around post-sale discounts.

• Normal trade discounts = No GST impact, no ITC reversal.
• Service-linked discounts = Consideration, GST applicable.

This brings greater clarity and helps both suppliers and dealers avoid unnecessary disputes during audits.

Cess हटने से कितना मिलेगा फायदा? पुराने Stock और Credit पर क्या असर पड़ेगा?

• From 22nd September 2025, compensation cess is removed for most goods under GST 2.0.
• Exception: Tobacco and tobacco-related products (cigarettes, pan masala, gutkha, chewing tobacco, bidi) will continue to attract compensation cess until outstanding GST compensation loans and interest are fully repaid.
• For consumers, this means many goods may become cheaper. For businesses, it raises issues like unutilised cess credits and treatment of old inventory.

Background — Why Compensation Cess Was Introduced

When GST was implemented in 2017, states were worried about revenue losses. To compensate them, the central government introduced compensation cess on certain goods, mostly luxury and sin products. The cess collected was used to pay states for their revenue shortfall. Over time, loans were also taken against this cess fund.

What the Government Decided

• The GST Council simplified slabs under GST 2.0. As part of this, compensation cess is discontinued for most goods from 22nd September 2025.
• Only tobacco-related products will continue to attract compensation cess until the loans and interest obligations of the cess account are cleared.

Items Where Compensation Cess is Removed

Compensation cess is removed for almost all goods. Examples include:

• Consumer electronics and appliances
• Automobiles and vehicles (moved under new GST slabs)
• Coal and other raw materials where cess earlier applied

If an item’s new GST rate is notified without cess, it means the cess is no longer applicable.

Items Still Attracting Compensation Cess

• Cigarettes
• Pan masala
• Gutkha
• Chewing tobacco (like zarda)
• Unmanufactured tobacco and bidi

These will continue under the existing GST + cess structure until the government clears all dues under the compensation cess account.

Practical Issues for Businesses

1. Unutilised Cess Credits

Many businesses, especially automobile dealers, have accumulated cess credit balances. With the cess removed, there’s no future liability to adjust these credits. Unless the government allows refunds or special transition rules, these credits could lapse, causing big financial losses.

2. Old Inventory

Dealers holding stock purchased under old GST + cess rates may not be able to recover the cess already paid on those goods. This could mean a cash-flow loss and may force discounting or write-offs.

3. Consumer Pricing

While tax on many items is reduced, the final benefit depends on whether businesses pass on the reduction. Companies may need to revise MRP using stickers or new packaging, and compliance will be checked by the Legal Metrology Department.

4. Tobacco Exception

Consumers buying cigarettes, pan masala, or tobacco products will not see any relief, as these continue to attract cess until the cess account loans are repaid.

FAQs

Q1 — From which date is compensation cess removed?
22nd September 2025, except for tobacco products.

Q2 — Will prices come down automatically?
Not necessarily. It depends on how quickly businesses update MRP and whether they pass on the tax cut to consumers.

Q3 — What about existing compensation cess credits?
Unclear. Businesses are demanding refunds or transitional provisions. Until notified, credits may remain blocked.

Q4 — Why are tobacco products excluded?
Because large loans and interest payments were taken against cess collections. Until those are repaid, cess will continue on tobacco.

Q5 — What about old stock?
Old stock purchased under higher tax + cess may need MRP revisions through stickers or re-labeling. Businesses must follow official rules for compliance.

What Businesses & Consumers Should Do

Businesses:

• Reconcile cess credit balances and plan for possible losses.
• Review inventory and pricing strategies.
• Watch for official notifications on transition rules.
• Communicate MRP changes transparently to customers.

Consumers:

• Expect lower prices on many goods after cess removal, but benefits may take time to reflect.
• No relief for tobacco-related products.

The removal of compensation cess for most goods is a major simplification of GST and a relief for consumers. However, businesses face short-term challenges due to unutilised credits and old inventory. Until the government issues detailed transition rules, taxpayers should carefully track notifications and plan ahead.

GST Update: 3-Year Return Filing Rule Gets Fresh Implementation Date

The Goods and Services Tax Network (GSTN) has issued an important advisory dated 9th September 2025, reminding taxpayers about the 3-year time limit for filing GST returns. This advisory is based on amendments made in the Finance Act, 2023 (8 of 2023), effective from 1st October 2023 via Notification No. 28/2023 – Central Tax dated 31st July 2023.

 What Does the Rule Say?

As per the amendment, taxpayers will not be allowed to file GST returns after the expiry of 3 years from the due date of furnishing the return.

This restriction applies to the following key sections of the CGST Act:

• Section 37 – Outward Supplies (GSTR-1, IFF, etc.)
• Section 39 – Payment of liability (GSTR-3B, GSTR-4, GSTR-5, etc.)
• Section 44 – Annual Return (GSTR-9, 9C)
• Section 52 – TCS Returns (GSTR-8)

 Returns Covered

This includes most compliance forms:

• GSTR-1, GSTR-1A, IFF
• GSTR-3B (Monthly/Quarterly)
• GSTR-4, GSTR-5, GSTR-5A
• GSTR-6, GSTR-7, GSTR-8
• GSTR-9, GSTR-9C

 When Will This Apply?

The restriction will be implemented on the GST portal starting from September 2025 tax period.

 This means:

• Any return whose due date is older than 3 years and is still pending will be barred from filing.
• Practically, the system will lock out old returns after the 3-year window.

 Illustration: Returns That Will Be Barred from 1st October 2025

 Example:

• If you missed filing GSTR-3B for August 2022, after 1st October 2025, you will never be able to file it.
• Similarly, if you have not filed GSTR-9 (Annual Return) for FY 2020-21, you will be permanently barred from doing so.

 Why This Matters?

1. Permanent Closure: Once 3 years are over, you lose the right to file the return.
2. Compliance Risk: Non-filing may lead to notices, penalties, late fees, and disallowance of ITC.
3. Reconciliation Issues: Mismatches in GSTR-2A/2B and books of accounts will remain unresolved.
4. Business Impact: Pending returns may affect loan approvals, audits, and vendor relationships.

 Advisory to Taxpayers

• Reconcile your records immediately.
• File all pending GST returns before the 3-year cut-off.
• Don’t wait until the portal locks them permanently in October 2025.

 What the Earlier Advisory (7th June 2025) Said

• GSTN reminded taxpayers that, as per Finance Act 2023, no GST return can be filed after 3 years from its due date.
• Covered returns: GSTR-1, 3B, 4, 5, 5A, 6, 7, 8, 9.
• Implementation date: from July 2025 tax period onwards.
• This was a general reminder – “3-year bar rule is coming, reconcile your returns.”
• It referred back to the first advisory issued on 29th October 2024, when this provision was first highlighted.

 In short, June advisory = Heads-up alert that the 3-year cut-off will soon start applying (from July 2025 period).

 What the Latest Advisory (9th September 2025) Adds

• It goes one step ahead by giving clear illustration + cut-off periods.
• It specifies exactly which old returns will be barred from 1st October 2025.
• Example: GSTR-3B of Aug 2022, GSTR-1 of Aug 2022, GSTR-9 of FY 2020–21 → all these will be permanently locked after Oct 1, 2025.
• Thus, it’s no longer a general reminder – it is the final warning with dates and examples.

 September advisory = Practical effect is now visible – some returns are getting permanently locked after 3 years.

 What It Means for Taxpayers

1. Earlier (Oct 2024 & June 2025 advisories) → Awareness stage: Law exists, deadline is coming.
2. Now (Sep 2025 advisory) → Execution stage: Portal will start barring old returns in real-time.

 Bottom line:

• No more chances after 3 years.
• Any pending returns beyond the 3-year limit will be permanently closed on the GST portal.

Government Allows Revision of MRP on Unsold Inventory After GST Rate Change

The Ministry of Consumer Affairs, Food and Public Distribution has allowed manufacturers, packers, and importers of pre-packaged commodities to revise the retail sale price (MRP) on unsold stock after the recent GST rate changes.

 Key Points:

1. Revised MRP Declaration – Can be done by stamping, stickers, or online printing on the unsold stock manufactured/packed/imported before GST revision.
2. Conditions:
   • The original MRP must still be visible, and the revised price cannot overwrite it.
   • The difference between old and new MRP should only reflect the exact impact of tax increase or reduction (not more).
   • In case of tax reduction, the revised MRP cannot exceed the reduced tax benefit.
3. Public Notice Requirement:
   • Manufacturers/packers/importers must publish at least two newspaper advertisements and circulate notices to dealers and Legal Metrology Directors (both Central & State) regarding the change in prices.
4. Timeline:
   • This relaxation is available till 31st December 2025 or until the old stock/packaging material is exhausted, whichever is earlier.

 Meaning for Consumers & Businesses:

• Businesses can legally update prices on old stock due to GST changes.
• Consumers can still see both original and revised MRPs for transparency.
• Revised prices must be genuine and only reflect the GST impact (no artificial hike).

GST 2.0: CBIC issues clarification on social media buzz regarding transition benefits under new GST framework

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GST 2.0: Relief for Hotels & Restaurants with Lower Tax, But Loss of Input Credit a Concern

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0% GST: Complete List of Tax-Free Goods & Services

The 56th GST Council meeting has rationalised India’s GST structure into two main slabs – 5% and 18%, with a Nil rate for essential goods and services,

Effective Date of Nil GST Rates

• 22nd September 2025

 Essential Food Products – Now Nil Rated

Life-Saving Drugs & Medicines – Now Nil Rated

Group 1 – Earlier @5% → Nil

• Agalsidase Beta
• Imiglucerase
• Eptacog alfa (activated recombinant coagulation factor VIIa)

Group 2 – Earlier @12% → Nil

• Onasemnogene abeparvovec
• Asciminib
• Mepolizumab
• Pegylated Liposomal Irinotecan
• Daratumumab (IV & Subcutaneous)
• Teclistamab
• Amivantamab
• Alectinib
• Risdiplam
• Obinutuzumab
• Polatuzumab vedotin
• Entrectinib
• Atezolizumab
• Spesolimab
• Velaglucerase Alpha
• Agalsidase Alfa
• Rurioctocog Alpha Pegol
• Idursulphatase
• Alglucosidase Alfa
• Laronidase
• Olipudase Alfa
• Tepotinib
• Avelumab
• Emicizumab
• Belumosudil
• Miglustat
• Velmanase Alfa
• Alirocumab
• Evolocumab
• Cystamine Bitartrate
• CI-Inhibitor injection
• Inclisiran

 Stationery & Education Items – Now Nil Rated

 Other Goods Now Nil Rated

 Insurance Services – Now Nil Rated

What is the GST rate on food preparations not elsewhere specified in any of the schedules?

Food preparations not elsewhere specified will attract a GST rate of 5%.

UHT (Ultra High Temperature) milk has been exempted. Does exemption to UHT milk also cover plant-based milk?

All dairy milk, other than UHT milk, were already exempt from GST. Hence UHT milk has been exempted to provide same tax treatment to similar goods. Plant based milk drinks except soya milk drinks attracted 18% GST while soya milk drink attracted 12% GST. The GST rate on plant-based milk drinks and soya milk drinks have now been reduced to 5%.

What is the reason for revising GST rate only on specified varieties of Indian bread?

Bread was already exempt while pizza bread, roti, porotta, paratha etc attracted different rates. All Indian breads, by whatever name called have been exempted even though only few goods have been mentioned by way of illustrative example.

Why is there a different tax treatment between paneer and other cheese?

Prior to rate rationalisation, paneer sold in other than pre-packaged and labelled form already attracted nil rate. Therefore the changes have been made only in respect of paneer supplied in pre-packaged and labelled form. Paneer is an Indian cottage cheese. This is mostly produced in small scale sector. The measure is intended to promote Indian cottage cheese.

What is the reason for differential tax treatment for natural honey and artificial honey?

This is intended to promote natural honey.

Why have all medicines not been exempted from GST in general?

If drugs/ medicines are fully exempted, the manufacturers/dealers would not be able to claim input tax credit on GST paid on raw materials and will have to reverse the ITC paid on the inputs. This would increase their effective tax incidence and cost of production. This may in turn be passed on to consumers/ patients in the form of higher prices which in turn would make the measure counterproductive.

Why has the GST rate been reduced on medical devices? Will this not lead to inverted duty structure?

The measure is intended to lower the cost of healthcare and thereby benefit patients, particularly the poor. This measure does not create any new inverted duty structure as the existing structure already had inverted duty structure although this measure may deepen theinversion. However, under GST, refund of accumulated input tax credit arising on account of

inverted duty structure is available to manufacturers. GST Council has also recommended process reforms to enable expedited refunds.