What changed
The GST Council decided the changes at its 56th meeting on 3 September 2025. Notification 9/2025-Central Tax (Rate), dated 17 September 2025, supersedes Notification 1/2017-Central Tax (Rate) and sets out the goods rates in seven schedules. The combined CGST and SGST rates are 5%, 18%, 40%, 3%, 0.25%, 1.5% and 28%. Matching notifications were issued for integrated tax and union territory tax, and for exempt goods and services.
Pan masala, gutkha, cigarettes, chewing tobacco, unmanufactured tobacco and bidi did not move on 22 September 2025. Their rates were changed from 1 February 2026 by Notification 19/2025-Central Tax (Rate) dated 31 December 2025: biris to 18%, and pan masala, cigarettes and other tobacco products to 40%. For all other goods, and for services, the new rates apply from 22 September 2025.
Where a supply straddles the date, Section 14 of the CGST Act decides whether the old or the new rate applies, based on when the goods or services were supplied, invoiced and paid for.
The rate change came with an end to the compensation cess on most goods from 22 September 2025. Goods that moved to the 40% rate, such as specified motor vehicles and aerated drinks, no longer carry cess on top. The cess continued for tobacco and pan masala until 1 February 2026, when Notification 03/2025-Compensation Cess (Rate) dated 31 December 2025 set it to nil for those entries.
Services rates were changed by separate notifications of the same date. Among the changes announced by the GST Council, individual life and health insurance policies became exempt, and hotel accommodation priced up to ₹7,500 a unit a day and services of gyms, salons and yoga centres moved to 5% without input tax credit. Each entry carries conditions, which are in the services rate notifications on cbic-gst.gov.in.
A supplier whose output rate fell below the rate on its inputs may build up unused input tax credit. Refund of that credit under the inverted duty structure is subject to conditions, so stock and purchase planning around the rate change should be checked against the rules.
Who is affected
All GST-registered suppliers, who needed to update rates in invoices and billing software, and their customers.
Effective dates
| Item | Date or period |
|---|---|
| 56th GST Council meeting | 3 September 2025 |
| Rate notifications issued | 17 September 2025 |
| New rates in force | 22 September 2025 |
What to do now
- Check the HSN or SAC rate for each item in the billing software against the new schedules.
- Apply Section 14 to supplies, invoices and advances that span 22 September 2025.
- Review input tax credit and pricing where an item moved to a lower rate.
Penalty or consequence if missed
Tax charged at a lower rate than the correct one is still payable, and can be demanded under Section 73 or 74 of the CGST Act with interest at 18% a year under Section 50, plus a penalty. Tax collected from customers at a higher rate than due must still be paid to the Government under Section 76, so billing software should have been updated from 22 September 2025.
Official source
Effective: 22 Sep 2025 · Note published · Last reviewed
Related on this site
This note summarises a public notification for general information. It is not professional advice and does not cover every condition or exception, and the rule can change again by a later notification. Read the notification itself before acting on it, or consult a qualified professional on your own facts.