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GST Rule Changes for FY 2025 26
September, 04th 2025

1. GST Rate Overhaul: “GST 2.0” Effective from 22 September 2025

  • The GST Council (56th meeting) announced a major simplification of GST slabs:

    • Merit rate: 5%, covering most daily essentials (e.g., life-saving drugs, textiles, packaged food).

    • Standard rate: 18%, for the majority of goods and services.

    • De-merit rate: 40%, applicable to luxury and sin goods like high-end automobiles, tobacco, spirits, etc. Reuters+1The Times of IndiaIndia BriefingPress Information BureauFinancial Times

  • Examples of impact:

    • Essentials like noodles, chocolates, butter → now taxed at 5% Indiatimes

    • Appliances such as ACs, TVs saw a reduction from 28% to 18% Indiatimes

    • Budget hotels (rooms ≤ INR 7,500) GST slashed from 12% to 5%; restaurant dining from 12–18% to 5% Navbharat Times

    • Economy flight tickets: 5%; Business class: reduced from 18% to 12% Navbharat Times

    • Insurance products, cement, small vehicles, EVs also benefit from lower rates IndiatimesReutersThe Economic Times

  • Exceptions: Products like pan masala, gutkha, cigarettes, bidi, unmanufactured tobacco will retain existing GST + compensation cess rates until compensation cess liabilities are settled. Transition date to be decided later Press Information BureauTaxGuru


2. Compliance & Procedural Changes from April–July 2025

  • Multi-Factor Authentication (MFA): Mandatory for all GST portal users from FY 2025–26 to bolster security IndiaFilingsIndia BriefingAURIGA ACCOUNTING PRIVATE LIMITED

  • Input Service Distributor (ISD): Mandatory ISD registration from April 1, 2025, for businesses operating multiple GSTINs under one PAN IndiaFilings

  • Returns Filing Rules:

    • GSTR-7 must be filed sequentially from November 1, 2024—skipping periods is not allowed, even if the return is Nil IndiaFilings

    • From July 2025, GST returns older than three years past due cannot be filed or revised—a strict time-bar enforcement The Times of India

  • Invoice & E-Way Bill Enhancements:

    • New invoice series required from April 1, 2025—must be sequential, unique, and year-specific IndiaFilings

    • E-Way bills can only be generated against documents no older than 180 days; extensions capped at 360 days IndiaFilingsIndia Briefing

  • Used Cars: Uniform 18% GST on margin value across all used vehicle categories IndiaFilings

  • Amnesty/Waiver Scheme:

    • Taxpayers with dues from FY 2017–18 to 2019–20 can avail full waiver of interest and penalties if principal tax is paid in full by March 31, 2025, and application is filed (Form SPL-01/SPL-02) by June 30, 2025 IndiaFilings


3. Other Noteworthy Updates

  • GST Appellate Tribunal (GSTAT): Operationalisation recommended, with appeal hearings expected to start by December 2025 Press Information Bureau

  • Clarification of 'Specified Premises':

    • Stand-alone restaurants can no longer declare themselves as "specified premises" to avail 18% GST with ITC benefit—clarified to curb misuse Press Information Bureau

  • Valuation Rules: Adjustments proposed, e.g., for lottery tickets, aligning with rate changes Press Information Bureau

  • Stricter ITC Claim Conditions:

    • ITC claim depends on the supplier filing returns and paying tax—aimed at reducing misuse sscoindia.com


Summary Table

ChangeEffective DateKey Impact
New GST slabs (5%, 18%, 40%) 22 September 2025 Simplified rates; relief on essentials; higher tax on luxury/sin goods
MFA required From FY 2025–26 (April 2025) Increased portal security
ISD registration mandatory From 1 April 2025 Better ITC tracking for multi-location businesses
E-Invoice & Invoice Series From 1 April 2025 Uniform, audited billing system
Continuous GSTR-7 sequencing From 1 November 2024 No skipping, stricter TDS practices
Time-bar on returns From July 2025 No revisions past 3 years
Amnesty scheme deadline Pay by 31 March 2025; apply by 30 June 2025 Penalty/interest waiver on older dues
GSTAT & procedural reforms By end-2025 Faster dispute resolution
Clarified definitions & ITC rules Phased Prevent misuse, tighten compliance

Let me know if you'd like a deeper dive into any specific area—like E-Way Bill rules, GSTAT procedures, or how these changes affect your particular business sector.

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