GST rates on several essential items have been reduced. The changes are summarised as follows:

• Household necessities such as soaps, toothpaste, and Indian breads are now taxed at 5% or exempt altogether.
• Pre-packaged and labelled chenna/paneer has been reduced from 5% to Nil.
• The rate on dairy fats and spreads, including ghee, butter oil, and dairy spreads, as well as cheese, has been reduced from 12% to 5%.
• In addition, a number of life-saving drugs and medicines have seen their rates reduced from 12% to either 5% or Nil.
• Earlier, lithium-ion batteries attracted 18% GST and other batteries attracted 28% GST. Henceforth, all batteries under heading 8507 (HSN Code) will be uniformly taxed at 18% GST.
• The GST exemption on insurance covers all individual life insurance policies, including term, ULIP, and endowment plans, as well as reinsurance services related to them. Similarly, under health insurance, the exemption extends to all individual health insurance policies, including family floater and senior citizen plans, along with the related reinsurance services.
• A small basket of tobacco products (for example, pan masala, gutkha, cigarettes, unmanufactured tobacco and bidi) will transition to the revised rates of GST at a later date to be notified after compensation-cess obligations are discharged. The Council has also flagged sectoral and procedural items such as retail sale price (RSP)-based valuation for the tobacco basket and an explanation of “specified premises” for restaurant services.
• Item-level changes are set out in the annexures to the official press release (Read Annexure-I/II for goods and Annexure-III/IV for services—Recommendations of the 56th Meeting of the GST Council).

Transitioning to the Revised GST Rates.

• Applicable Rate based on Date of Supply.

As per Section 14 (a)(i) of CGST Act, 2017, in case the goods or services or both have been supplied before the change in rate of tax, and the invoice for the same has been issued after the change in rate of tax, then the time of supply, i.e., the date of liability to pay tax on such supply, will be as follows:

• • If the payment is received after the change in rate of tax, then the time of supply shall be the date of receipt of payment or the date of issue of the invoice, whichever is earlier.
  • If the payment has been received before the change in rate of tax, the time of supply shall be the date of receipt of payment.
• Input Credit, Refunds, & Record-Keeping.

Input Tax Credit (ITC) that was correctly charged on purchases under the rate that applied at that time remains available and can be used through the electronic credit ledger (Section 49 of the CGST Act). The ITC may be utilised to discharge outward tax liability on supplies of goods or services (or both) made up to 21^st September, 2025. However, with effect from 22^nd September, 2025, when the revised rate becomes applicable, the ITC will be required to be reversed in accordance with the provisions of the CGST Act, 2017.

As regards the eligibility to claim a refund of accumulated credit arising from an inverted duty structure for supplies made up to the effective date of the revised rate, the matter stands clarified under Circular No. 135/05/2020-GST dated 31.03.2020 (as amended). The circular provides that a refund of accumulated ITC under clause (ii) of the first proviso to section 54(3) of the CGST Act is permissible only where credit has accumulated on account of the rate of tax on inputs being higher than that on output supplies. In a situation where the input and output are the same, albeit subject to different tax rates at different points in time, such cases are not covered within the ambit of clause (ii) of the first proviso to section 54(3).

• Movement of goods and e-way bills.

E-way bills generated for goods in transit remain valid for their original validity period, and it is not necessary to cancel and regenerate the e-way bill due to the change in GST rate.

• Imports and pricing.

The Integrated Goods and Services Tax (IGST) payable on import of goods shall be levied at the rate applicable to such goods as specified under the relevant GST rate notifications. However, where a specific exemption from IGST has been granted by way of a separate exemption notification, such exemption will prevail and the IGST will not be levied to that extent.

• Sector-specific settings (tobacco valuation; restaurant services).

Tobacco valuation (retail sale price or RSP): The Council has recommended retail sale price-based valuation under GST for Pan Masala, Cigarettes, Gutkha, Chewing Tobacco, Zarda, Scented tobacco and Unmanufactured Tobacco. Accordingly, consequent amendments in CGST Rules, 2017 and notifications will be carried out. In simple terms, tax will be computed on the maximum retail price printed on the pack rather than on the transaction value.

Restaurant services (“specified premises”): A stand‑alone restaurant cannot treat itself as a “specified premises” in order to pay GST rate at 18 percent along with Input Tax Credit. Accordingly, the standard rule of GST at 5% without input tax credit will apply.

• Dispute resolution.

The Goods and Services Tax Appellate Tribunal (GSTAT) will be made operational for accepting appeals by the end of September 2025 and is expected to commence hearings by the end of December 2025. The Council has further recommended 30^th June 2026 as the cut-off date for filing backlog appeals.

• Provisional Refunds.
  • Risk-Based Provisional Refund for Zero-Rated Supplies: The Council has recommended an amendment to Rule 91(2) of the CGST Rules, 2017 to provide for a sanction of 90% of the refund claimed as a provisional refund, based on system-driven risk identification and evaluation. In exceptional cases, the proper officer may, by recording reasons in writing, undertake detailed scrutiny of the refund claim instead of granting a provisional refund. Further, a notification will be issued to specify categories of registered persons who shall not be eligible for provisional refund. This mechanism will be effective from 01^st November 2025.
  • Risk-Based Provisional Refund for Inverted Duty Structure (IDS): The Council has recommended an amendment to Section 54(6) of the CGST Act, 2017 to extend provisional refund (90% of the claimed amount) to cases arising from inverted duty structure, on the same lines as refunds relating to zero-rated supplies. Pending the requisite legislative amendment, the Central Government has decided that the CBIC will issue instructions to Central Tax field formations to provisionally sanction 90% of refund claims arising from IDS, based on risk identification and evaluation by the system. This too shall be effective from 01^st November 2025.

Positioned as a reform for the masses, the revised GST rates will reduce costs across nearly 400 products, covering both daily-use goods (soaps, shampoos) and larger consumer durables and vehicles (cars, tractors, air conditioners).