The Next Generation 2.0 GST Rate Reform, implemented through a series of notifications dated September 17, 2025, represents a comprehensive restructuring of India's Goods and Services Tax (GST) rate system. The reform aims to simplify the tax structure, remove anomalies, and align GST rates with the current economic and policy priorities. It rationalises goods and services under broad rate categories while ensuring stability, uniformity, and transparency in taxation.
Key Features of the Rate Restructure
- The new framework introduces several structural changes to the GST rate mechanism. The Compensation Cess has been discontinued and its incidence merged into the GST rate itself for certain luxury and sin goods.
- Inverted duty structures have been corrected by reducing rates on inputs and intermediate goods to ensure parity with final output taxes.
- The reform establishes uniform rate slabs of 5 percent, 18 percent, and 40 percent, replacing the earlier fragmented structure.
- Many goods previously taxed at intermediate rates (e.g., 12%) have been moved to the 5% slab, including common processed foods, agricultural supplies, and renewable energy equipment.
- Revised exemptions at nil rate for lifesaving drugs, education, health, and certain insurance services.
- Optional two-rate choice for some services like passenger transport allows operators to charge a concessional 5% without ITC or 18% with ITC claims.
- Further, in alignment with environmental objectives, renewable energy equipment now attracts reduced GST rates, thereby incentivising sustainable growth.
- Supplies made before the rate change but invoiced after will be governed by Section 14 of the CGST Act, which determines the time of supply for taxation purposes.
- Input Tax Credit (ITC) accumulated under the old rates will remain valid; however, ITC relating to supplies that become exempt post-change must be reversed in accordance with the CGST Rules.
- No new e-way bills are required for goods already in transit as on the date of rate change.
- Refunds now require Aadhaar authentication to prevent misuse, effective from October 1, 2025.
- Annual return filing exemptions introduced for businesses with turnover up to ₹2 crore.
Notifications Introducing or Amending GST Rates (Goods and Services)
|
S. No. |
Notification (No. / Date) |
Short Subject |
Earlier Notification |
Summary |
Effective Date |
|
1 |
9/2025-Central Tax (Rate) dated September 17, 2025 |
Comprehensive revised GST rate schedule for goods under CGST (HSN-wise). |
Supersedes 1/2017-CT(Rate) dated June 28, 2017. |
Substitutes all schedules of Notification 1/2017 with revised HSN-based 5%, 18% and 40% schedules; Schedule I: essential/low-value goods - 2.5% CGST Schedule II: intermediate goods - 9% CGST Schedule III: luxury goods - 20% CGST Schedule IV-VI: low-rate items - 1.5%, 0.125%, 0.75% CGST Schedule VII: Pan masala and tobacco-related products - 14% CGST(Note: Sum total of CGST + SGST/ UTGST or IGST would be Effective Rates, applicable on Goods. |
September 22, 2025 |
|
2 |
10/2025-Central Tax (Rate), dated September 17, 2025 |
Comprehensive Revised exemption list of goods under CGST. |
Supersedes 2/2017-CT(Rate) dated June 28, 2017. |
Replaces entire exemption list with new annexure; adds Ultra-High Temperature milk, Indian breads, and other basic goods to exemption schedule. Agricultural, food, health, education items, certain drugs, musical instruments - Nil CGST |
September 22, 2025 |
|
3 |
11/2025-Central Tax (Rate), dated September 17, 2025 |
Concessional rates for petroleum exploration and allied operations. |
Amends 3/2017-CT(Rate) dated June 28, 2017. |
Amends entries for equipment and goods used in petroleum extraction and Exploration and Production operations; Goods imported for petroleum operations - 9% CGST |
September 22, 2025 |
|
4 |
12/2025-Central Tax (Rate), dated September 17, 2025 |
Amendments to rate entries for motor vehicles, used goods, and schedule corrections. |
Amends 8/2018-CT(Rate) dated January 25, 2018. |
Deletes or modifies serials for used vehicles and small cars; aligns vehicle-related entries to 9/2025 schedule. |
September 22, 2025 |
|
5 |
13/2025-Central Tax (Rate), dated September 17, 2025 |
Sector-specific rate amendments for handicrafts and cottage industry goods. |
Amends 21/2018-CT(Rate) dated July 26, 2018. |
Revises rate lines for handicrafts, handloom, and cottage industry products; harmonises with new HSN classification. |
September 22, 2025 |
|
6 |
14/2025-Central Tax (Rate), dated September 17, 2025 |
Revised rates for building materials such as bricks and fly-ash blocks. |
Amends prior construction material notifications. |
Introduces new HSN lines for bricks and blocks; updates marble, granite, and stone entries; |
September 22, 2025 |
|
7 |
15/2025-Central Tax (Rate), dated September 17, 2025 |
Revised service rate entries (transport, courier, job work). |
Amends various earlier service rate notifications |
Updates rate options: 5% (no ITC) or 18% (with ITC) for transport; reduces job work rates for pharma and leather; reclassifies residuary job work to 18%. |
September 22, 2025 |
|
8 |
16/2025-Central Tax (Rate), dated September 17, 2025 |
Exemptions and nil-rated services including life and health insurance. |
Amends earlier exemption notifications for services. |
Exempts individual life and health insurance policies; substitutes earlier exemption entries with updated list of welfare-oriented services. |
September 22, 2025 |
|
9 |
17/2025-Central Tax (Rate), dated September 17, 2025 |
New entries for e-commerce and small supply services. |
Amends multiple earlier rate and exemption notifications for small-value services. |
Creates and modifies entries for local delivery and small e-commerce services; clarifies classification under new consolidated schedule. |
September 22, 2025 |
CAclubindia
