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For most goods and services covered by the 56th GST Council rate changes, the revised rates applied from 22 September 2025. The main transition rule is supply-based: stock bought earlier does not keep its old rate when it is supplied after the effective date. Transactions that straddle the change must be tested under section 14 of the Central Goods and Services Tax Act using the supply, invoice and payment dates.
Cigarettes, chewing tobacco products such as zarda, unmanufactured tobacco and beedi were expressly excepted in the official FAQ: their existing GST rates and compensation cess continued until a later date was notified. Always verify the product or service classification and the current rate notification before issuing an invoice.
What date did the GST rate change take effect?
The broad effective date for the 56th GST Council’s rate changes was 22 September 2025. This date covers the goods and services included in the notified revision, not every item in the GST schedule.
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The Ministry of Finance FAQ published on 3 September 2025 identifies a specific tobacco exception. Existing GST rates and compensation cess continued for cigarettes, chewing tobacco products including zarda, unmanufactured tobacco and beedi until a later implementation date was notified. A business dealing in one of these products must not apply the general 22 September date without checking the product-specific notification.
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Why the date alone is not enough
GST liability depends on the applicable time-of-supply rule and the classification of the transaction. The 22 September date is a starting point. You must still establish whether the supply occurred before or after the change, when the invoice was issued, when payment was received under the statutory definition, and whether a separate notification changes the result.
The 57th GST Council meeting on 8 October 2026 also made recommendations on process and clarification. The PIB release states that a recommendation takes effect only through the relevant circular, notification or amendment to law. Treating a Council recommendation as operative before that legal instrument is issued can produce an incorrect invoice or return.
What rate applies to old stock?
Use the rate in force when the goods are supplied, not the rate that applied when the supplier purchased or received the stock. The official FAQ states the principle plainly: “GST is levied on supply.”
For example, a wholesaler bought taxable goods on 15 September 2025 while the old rate applied. The wholesaler dispatches and supplies those goods on 25 September, after the revised rate takes effect. The outward supply is generally taxed at the revised rate, assuming the goods are within the 56th Council change and no product-specific exception applies.
Inventory date versus outward-supply date
- The purchase date determines the tax charged on the inward supply, subject to the normal input-tax-credit rules.
- The outward supply date and the section 14 analysis determine the tax charged to the customer.
- Holding goods in a warehouse does not preserve the old output rate indefinitely.
- A product-specific notification can override the broad transition date for that product.
Update price lists, billing rules and tax-code mappings for stock that will be supplied after the effective date. Do not change the historical purchase invoice merely because the later outward rate is different.
How do you determine tax when supply, invoice and payment cross the change date?
Section 14 of the CGST Act provides the time-of-supply rule for a change in the rate of tax. It does not reduce every case to “the invoice date decides.” Compare all three events and apply the statutory combination that matches the facts.
| When did supply occur? | Invoice and payment timing | Time-of-supply date under section 14 |
|---|---|---|
| Before the change | Invoice and payment both after the change | Earlier of payment receipt or invoice issue |
| Before the change | Invoice before; payment after | Invoice issue date |
| Before the change | Payment before; invoice after | Payment receipt date |
| After the change | Invoice before; payment after | Payment receipt date |
| After the change | Invoice and payment both before | Earlier of payment receipt or invoice issue |
| After the change | Invoice after; payment before | Invoice issue date |
What counts as receipt of payment?
Section 14 defines the date of receipt of payment as the earlier of:
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- the date the amount is credited to the supplier’s bank account.
There is an important proviso for a rate change: if the bank credit occurs more than four working days after the change date, the bank-credit date is substituted in the statutory calculation. Preserve the bank statement, book-entry date and invoice record so the selected date can be demonstrated later.
Worked transition examples
Supply before, invoice before, payment after: A service is completed on 20 September, the invoice is issued on 21 September and the customer pays on 30 September. The matrix points to the invoice issue date.
Supply before, payment before, invoice after: Goods are supplied on 20 September, payment is received on 21 September and the invoice is issued on 24 September. The payment-receipt date is the relevant date under the matrix.
Supply after, invoice before, payment after: A supply occurs on 25 September, but an invoice was issued on 20 September and payment arrives on 28 September. The payment-receipt date is selected for this combination.
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These examples illustrate the matrix; they do not replace checking the precise statutory facts, the type of supply and any special rule in the applicable notification.
How are advances treated?
An advance does not create a universal “old rate” or “new rate” answer. The official FAQ directs businesses to the time-of-supply provisions in section 14 where supply is incomplete or the invoice has not yet been issued.
For each advance, record:
- the date and amount of the advance;
- when the amount was entered in the supplier’s books and credited to the bank;
- whether the goods or services had been supplied, in whole or in part;
- the invoice issue date; and
- whether the product or service is covered by a separate transition notification.
Apply the relevant section 14 scenario to those facts. Avoid a blanket policy such as “all advances before 22 September use the old rate” unless the statutory analysis for that transaction reaches that result.
Does an invoice issued after the change become a revised invoice?
No. A later invoice is not automatically a “revised invoice” merely because a GST rate changed.
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Tax-invoice rules require the invoice to show the applicable rate and tax amount. The rules also prescribe particulars for revised invoices and for credit and debit notes, but the revised-invoice provision identified in the reviewed CBIC text concerns supplies made during the period between retrospective effectiveness of a registration and the issue of the registration certificate. That is a specific registration situation, not a general rate-change mechanism.
What to do with an already-issued invoice
First determine the correct rate under section 14 and the product or service notification. Then review whether the original document is legally correct and whether a correction document is permitted or required for the particular error. The available transition material does not establish one universal document, return adjustment or deadline for every rate-change mistake.
Before issuing a credit note, debit note or replacement document, check the applicable notification, the CGST invoice and note rules, and the facts of the supply. Keep the original invoice, delivery evidence, payment trail and correspondence explaining the correction. Do not label a document “revised invoice” solely because it was issued after 22 September 2025.
What happens to input tax credit?
A registered person may claim input tax charged at the rate in force when the inward supply took place, subject to the normal statutory conditions and restrictions. A later reduction in the rate on the person’s outward supply does not automatically erase input tax credit that was correctly charged and duly availed.
Credit available in the electronic credit ledger can be used against output-tax liability under section 49(4), subject to the order and restrictions in the Act.
When can reversal be required?
If an outward supply becomes exempt from the change date, the official FAQ says input tax credit must be reversed for supplies from that date as required by the Act. The business should identify the affected stock, common inputs and capital goods, then apply the relevant reversal provisions rather than reversing every credit indiscriminately.
Maintain a transaction-level link between purchase invoices and outward supplies where possible. For common inputs, document the allocation method, period and calculations used. The correct result depends on whether the outward supply is taxable, exempt or mixed and on the statutory restrictions applicable to the credit.
Do e-way bills for goods already in transit need replacement?
No mandatory cancellation and fresh generation is required solely because the GST rate changes while goods are in transit. Existing e-way bills remain valid for their original validity period.
The rate change does not, by itself, change the transport document’s validity period. Continue to carry the invoice and e-way bill required for the movement, and correct a document only if there is a separate error or a specific rule requiring action.
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A practical workflow for businesses
- Identify the exact item or service. Confirm the HSN or service classification, taxable status and whether a tobacco or other product-specific exception applies.
- Confirm the legal effective date. Use the rate notification, not an informal summary or an unimplemented Council recommendation.
- Separate inward and outward transactions. The purchase date of old stock does not determine the output rate on a later sale.
- Record the three transition events. Capture the actual supply date, invoice issue date and payment-receipt date, including book entry and bank-credit evidence.
- Apply section 14’s matrix. Select the row that matches whether supply occurred before or after the change and how invoice and payment dates line up.
- Check advances separately. Do not apply a one-line advance policy without testing the statutory time-of-supply facts.
- Issue the invoice with the applicable rate and tax. Ensure all prescribed tax-invoice particulars are present.
- Review ITC consequences. Preserve eligible credit and calculate any reversal required where output supplies became exempt.
- Leave valid e-way bills in place. Do not cancel and regenerate solely for the rate revision.
- Escalate document corrections. If an invoice already issued shows the wrong rate, verify the correction instrument and filing treatment for that exact case before changing the books or return.
Records to retain for an audit trail
- Rate notifications and classification support used for the item or service.
- Purchase invoices showing the rate charged on inward supplies.
- Delivery challans, dispatch records, acceptance records or service-completion evidence establishing the supply date.
- Original and amended invoices, where a lawful correction is made.
- Bank statements and ledger entries proving the payment-receipt date.
- Advance receipts and later adjustment details.
- ITC eligibility and reversal workings.
- E-way bills and transport records for goods moving around the effective date.
- Written approval for any exception, correction or interpretation applied to a non-standard transaction.
Common mistakes and how to avoid them
Using the purchase date for old stock
This treats inventory ownership as the taxable event. Reconcile the outward supply date and apply the rate in force for that supply, subject to section 14 and any product exception.
Using only the invoice date
Section 14 expressly requires the supply and payment facts to be considered too. Preserve evidence for all three events.
Assuming every Council announcement is already law
The 57th Council’s recommendations require a relevant circular, notification or law amendment to have legal effect. Verify that instrument before changing a tax code.
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The revised-invoice rule has a specific retrospective-registration context. Determine the proper correction document from the invoice rules and the transaction facts.
Reversing all ITC after a rate reduction
A lower output rate alone does not automatically cancel correctly availed credit. Reversal becomes relevant where the law requires it, including newly exempt outward supplies.
Decision checklist for a transaction near the change date
Use this five-question test before approving the tax code:
- Is the item or service within the 56th Council rate revision, or is a product-specific exception in force?
- Did the supply occur before or after the applicable effective date?
- When was the invoice issued?
- When was payment received under the books-and-bank definition, including the four-working-day proviso?
- Does the transaction affect ITC because the outward supply is taxable, exempt or mixed?
If any answer is uncertain, pause the invoice and obtain the current notification and transaction-specific advice. The broad 22 September 2025 date is useful orientation, but it is not a substitute for the statutory analysis.
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