Ministry of Consumer Affairs, Food and Public Distribution has issued three FAQ documents on the changes in GST rates for services and goods (excluding specified tobacco products) effective from September 22, 2025. These FAQs were issued on September 22, 2025.
These changes apply to services and goods other than pan masala, cigarettes, chewing tobacco products, unmanufactured tobacco, and beedi.
For the specified tobacco goods, the existing rates will remain until a later date, to be notified after loan and interest liabilities on account of compensation cess are fully discharged.
The revised rates and the list of exempted goods are formalized in new notifications placed on the CBIC website, including Notification No. 9/2025- Central Tax (Rate) and Notification No. 10/2025-Central Tax (Rate) (for exemptions), both dated September 17, 2025.
Tax Liability and Input Tax Credit (ITC)
GST principles clarify how the rate changes affect supply time and ITC:
If goods/services were supplied before the rate change, but the invoice was issued after the change, the time of supply will be the earlier of the date of payment receipt or the date of invoice issue (if payment is after the change). If payment was received before the change, the time of supply is the date of payment receipt.
Registered persons are entitled to take credit of the input tax charged on inward supplies at the rate prevailing at the time of that supply. ITC already availed in the e-credit ledger can be used to discharge any output tax liability.
If an outward supply becomes exempt under the new rate schedule, the ITC related to that supply must be reversed for supplies made on or after September 22, 2025, as if it were an exempt supply.
GST is levied on supply. Therefore, the revised rate is applicable to all outward supplies of goods or services made on or after September 22, 2025, regardless of when the stock was procured. There is no mandatory requirement to cancel and regenerate e-way bills for goods in transit.
Sector-Specific GST Changes (Goods)
The rate rationalization aims to maintain tax incidence on compensation cess-earning items, simplify structures, and lower healthcare costs.
| Sector/Product | Previous Rate(s) | New Rate | Reason for Change |
| Medicines/Drugs | Varied (Some Nil) | 5% (Concessional) | To lower consumer cost; full exemption would break ITC chain and increase production cost. |
| Medical Devices | Varied (Up to 28%) | 5% | To lower the cost of healthcare for patients; existing structure already had inversion. |
| Small Cars (Petrol ≤ 1200cc/4000mm, Diesel ≤ 1500cc/4000mm) | 28% | 18% | Rate reduction. |
| Mid-size/Large/Utility Vehicles (≥ 1500cc or ≥ 4000mm length) | 28% + Cess (45-50% total) | 40% (No Cess) | Merging Compensation Cess to maintain pre-rationalization tax level. |
| 3-Wheelers & Buses (10+ persons) | 28% | 18% | Rate reduction. |
| Motorcycles ≤ 350cc | 28% | 18% | Rate reduction (includes 350cc). |
| Motorcycles > 350cc | 28% + Cess (45-50% total) | 40% | Merging Compensation Cess. |
| Bicycles and Parts | 12% | 5% | Rate reduction. |
| Agriculture Machinery (Sprinklers, harvesters, soil prep, etc.) | 12% | 5% | To provide relief to farmers; full exemption would disincentivize domestic producers. |
| Toilet Soap Bar | Varied | 5% | To lower monthly expenditure for lower-income segments. |
| Air Conditioners & Dishwashers | 28% | 18% | Rate reduction. |
| TVs/Monitors (≤ 32 inches was 18%, > 32 inches was 28%) | Varied (18% and 28%) | 18% (Uniform) | Rate standardization and reduction. |
| Spectacles/Goggles for Correcting Vision | 12% and 18% | 5% | Rate reduction. |
| Batteries (HSN 8507) (Lithium-ion was 18%, Others were 28%) | Varied (18% and 28%) | 18% (Uniform) | Rate standardization. |
| Coal | 5% + Cess of Rs 400/ton | 5% | Merging Cess to maintain tax incidence; no additional burden. |
| Drones (All types) | Varied (5%, 18%, 28%) | 5% (Uniform) | Rate standardization and reduction. |
Sector-Specific GST Changes (Services)
| Service | Previous Rate | New Rate | Conditions/Notes |
| Passenger Transportation | 18% (Standard) | 5% (Merit Rate) | No ITC allowed at 5% rate. Option to charge 18% with full ITC remains. |
| Hotel Accommodation (Value ≤ Rs 7500/day) | 18% | 5% | Mandatory rate of 5% without ITC. |
| Beauty & Physical Well-being (Salons, gyms, yoga, etc.) | 18% | 5% | Mandatory rate of 5% without ITC. |
| Job Work for Pharmaceutical Products | 12% | 5% | With ITC. |
| Job Work for Hides, Skins, Leather (Chapter 41) | 12% | 5% | With ITC. Does not cover manufacture of leather goods/footwear (Chapter 42/64). |
| Residuary Job Work Services | 12% | 18% | With ITC (applies where no specific rate is notified). |
| Works Contract (Offshore E&P) | Varied | 18% | Works contract and associated services for offshore oil and gas E&P. |
| Actionable Claims (Betting, Lottery, Casinos, Online Money Gaming) | Varied | 40% | Applies to all specified actionable claims. |
| Admission to Sporting Events (like IPL) | 18% (Standard) | 40% | Applies to admission to sporting events other than recognized sporting events. |
| Life/Health Insurance (Individual) | Varied | Exempt | Applies to individual life and health policies (term, ULIP, family floater, etc.) and reinsurance services thereof. |
Multimodal and Logistics Services
The tax treatment for multimodal transport depends on the mode of conveyance:
- No Air Transport: 5% GST with restricted ITC. ITC is allowed only on input services of goods transportation, limited to 5% of the value. Other ITC must be reversed.
- Includes Air Transport: 18% GST with full ITC.
Note on Local Delivery Services (ECO)
The services are taxable at 18%. If supplied through an e-commerce operator (ECO) by an unregistered person, the ECO is liable to pay the 18% GST under section 9(5) of the CGST Act. The term “Goods Transport Agency” (GTA) does not include an ECO or the services of local delivery provided through an ECO.