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For most goods and services, India’s revised GST rates apply to supplies made from 22 September 2025. The rate on a sale is determined by the supply, its classification and the time-of-supply rules—not simply by when you bought or stocked the item. Correctly charged input tax on eligible business purchases does not become a lower credit merely because rates later change, but credit connected with supplies that become exempt may have to be reversed. A rate difference over time for the same goods does not, by itself, create an inverted-duty refund.
This guide explains the practical consequences for small businesses. It is based on the Ministry of Finance FAQ for the 56th GST Council decisions (3 September 2025), the Council’s 2025 release and a PIB explainer dated 21 September 2025. The GST Council index lists a 57th-meeting FAQ dated 8 October 2026; because its substantive text is not assessed here, check it, current CBIC notifications and the GST portal before acting.
The decisions that matter most to a small business
| Question | Practical answer |
|---|---|
| When did most revised rates start? | 22 September 2025, except specified tobacco products that remained under their earlier GST and compensation-cess rates until a later notification. |
| Does a rate change reduce credit on an old purchase? | No, if tax was correctly charged when the inward supply occurred and all statutory ITC conditions are met. |
| Can already-availed ITC be used? | Generally yes, through the electronic credit ledger against output tax, subject to section 49(4), the rules and other restrictions. |
| What if an outward supply becomes exempt? | Credit attributable to exempt supplies must be reversed as required by the CGST Act and rules. |
| Does holding stock through a rate change create an inverted-duty refund? | No. A time-based rate difference for the same goods is different from input tax being higher than output tax in the statutory sense. |
Registration thresholds were not changed by the 2025 rate revision, according to the PIB explanation of the Council decisions.
What changed on 22 September 2025
Most goods and services moved to the revised schedule
The Ministry FAQ says the revised rates for goods and services other than named tobacco products took effect on 22 September 2025. It does not provide a universal rate table that can safely be applied to every business. The correct rate depends on the exact product or service, its tariff or service classification, and the notification in force for that classification.
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Tobacco products were treated separately
Specified tobacco products were to continue under the existing GST and compensation-cess rates until a later date notified by the government. Do not assume that the 22 September date applies to a tobacco item without checking the relevant notification.
The tax follows the supply, not the purchase date
The official explanation states that “GST is levied on supply.” Therefore, a taxable outward supply made on or after the effective date generally uses the revised rate, even when the goods were purchased or manufactured earlier and were already in stock. The purchase invoice does not lock the eventual sale to the old rate.
Transactions straddling the change need the time-of-supply rules
When the supply, invoice and payment occur at different times, section 14 of the CGST Act governs which rate applies. An invoice date alone is not a universal answer. Examine the relevant combination of supply date, invoice issuance and payment, then apply the statutory rule for that combination. Keep the documents that establish each date so your return position can be explained later.
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| Situation | What to do |
|---|---|
| Goods bought before 22 September and sold on or after that date | Check the classification and apply the rate applicable to the outward supply, subject to the time-of-supply rules. |
| Invoice, supply and payment fall on different sides of the date | Apply section 14 rather than choosing the old or new rate from the invoice date alone. |
| Specified tobacco product | Check the later notification that ends the transitional treatment. |
How to work out the rate you should charge
- Identify the exact item or service. Record the product description, technical specifications, packaging and intended use. Small classification differences can produce different rates.
- Check the current rate notification. Use the latest applicable CBIC/GST notification and any amendments, not a rate remembered from an older invoice or a generic internet table.
- Determine the time of supply. For a normal transaction, establish when the supply occurred and when the invoice and payment were made. If the dates span a change, apply section 14.
- Check special treatment. Look for exemptions, nil-rating, composition-scheme restrictions, reverse charge, place-of-supply rules and the separate transition for specified tobacco products.
- Configure your billing system and retain evidence. Update item tax codes from the effective date, preserve old invoices, and keep the notification or classification analysis supporting the rate used.
Do not quote a rate to a customer solely because the goods were in stock before September 2025. The relevant question is how the outward supply is classified and timed.
Input tax credit after a GST rate change
Old purchases do not lose their correctly charged tax
A registered person may claim input tax charged on an inward supply used or intended for use in the course or furtherance of business, subject to the conditions, restrictions and documentation requirements of the CGST Act and rules. If the supplier correctly charged the rate applicable when the inward supply occurred, a later rate revision does not convert that tax into a smaller credit.
This is conditional, not automatic. The business still needs a valid tax invoice or prescribed document, receipt of the goods or services, the required return and supplier-reporting conditions, payment of tax to the government where required, and compliance with blocked-credit and time-limit rules. A rate change cannot cure a defective invoice or an otherwise ineligible expense.
Credit already in the electronic credit ledger
Duly availed credit can generally be used to discharge output tax liability through the electronic credit ledger, subject to section 49(4) and the rules. Continue to reconcile purchase records, supplier data and the ledger; do not treat the balance as usable for liabilities or purposes that the statute restricts.
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The treatment changes when the business starts making exempt outward supplies. The Ministry FAQ says ITC must be reversed as provided by the Act for supplies that become exempt from 22 September 2025. The amount and method depend on the statutory attribution and reversal provisions, including the distinction between inputs used exclusively for exempt supplies, exclusively for taxable supplies and common inputs or input services.
| Credit situation | General treatment |
|---|---|
| Input tax on an eligible purchase used for taxable business supplies | Retain and claim it if all CGST Act and rules conditions are satisfied. |
| Credit already validly availed before a later rate change | It is not reduced merely because the rate changed later; use remains subject to statutory restrictions. |
| Input or common credit attributable to supplies that become exempt | Reverse the amount required under the Act and rules from the applicable date. |
| Blocked or otherwise ineligible credit | Do not claim or use it, regardless of the rate change. |
Separate the status of credit you validly availed from the calculation for credit attributable to exempt turnover. Saying that “all old ITC is safe” is too broad.
Refunds: why a rate change is usually not enough
What the inverted-duty category addresses
Under the official explanation of section 54(3), an inverted-duty refund concerns accumulated ITC where the tax rate on inputs is higher than the rate on the outward supplies. The statutory category is about the input-output rate structure that creates accumulation, not simply about a new rate becoming effective on a particular date.
A time difference for the same goods is different
If you bought goods at one rate, a rate later changed, and you then sold the same goods at another rate, that timing difference does not itself qualify as an inverted-duty refund under the clause described in the FAQ. Do not file or promise a refund merely because stock crossed 22 September 2025.
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| Pattern | Inverted-duty analysis |
|---|---|
| Inputs are taxed at a higher rate than the taxable output supplies under the applicable structure | May fit the statutory category, subject to section 54(3), exclusions, calculations and documentation. |
| The same goods were purchased before a rate change and sold after it at a different rate | The temporal difference alone does not create the specified inverted-duty refund. |
| Accumulation results from exempt supplies or ineligible credit | Do not treat it as an eligible inverted-duty claim without analysing the statutory category and reversal rules. |
Announced 90% provisional refunds
The GST Council’s September 2025 release announced that a risk-based provisional process would provide up to 90% of an eligible inverted-duty refund claim, operationalised from 1 November 2025 through administrative instruction pending statutory amendments. This is a facilitation measure, not a guarantee that a claim is eligible or that every applicant receives 90%. Confirm the current instruction, risk checks, filing form and payment timelines before relying on it.
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Low-value export consignments
The Council also recommended removing the threshold limit for refunds on low-value export consignments made with payment of tax, particularly to help small exporters using courier or postal channels. The release describes this as a recommended amendment to the CGST Act. Verify that the amendment and its procedures are in force before treating the change as an available filing route.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Registration and e-commerce measures for smaller operators
Optional simplified registration route
The Council described an optional simplified registration scheme for low-risk applicants whose output tax liability on supplies to registered persons would not exceed ₹2.5 lakh per month, including CGST, SGST/UTGST and IGST. The announced design said registration would be automated within three working days and would be operationalised from 1 November 2025.
The Council estimated that the route would benefit around 96% of new applicants applying for GST registration. That is a Council projection, not an independently verified result. Check current eligibility, declarations, restrictions, Aadhaar or other authentication requirements and actual portal behaviour before selecting it. It is optional; a business that does not meet the conditions should use the regular route.
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The Council approved in principle a simplified registration mechanism for small suppliers using e-commerce operators across multiple states. At the time of the announcement, detailed modalities were still to be placed before the Council. Treat this as an in-principle decision unless a later notification specifies the states, thresholds, documentation, return obligations and effective date.
A practical compliance workflow
- Build a classification register. List every product and service, its HSN or SAC classification, taxable or exempt status and the notification supporting the rate.
- Split transactions at the transition date. Identify supplies made before and from 22 September 2025, then flag any invoice-payment combinations requiring section 14 analysis.
- Review opening stock. Keep the original purchase tax documents, but calculate output tax on later sales using the rate applicable to those outward supplies.
- Reconcile ITC. Match purchase invoices, supplier data, receipt evidence and the electronic credit ledger. Remove blocked or unsupported credit.
- Test exempt turnover. If any line became exempt, calculate the required reversal for exclusive and common inputs under the Act and rules and document the working.
- Screen refund claims. Establish whether accumulation is a genuine input-rate-over-output-rate inversion. Exclude a mere before-and-after rate difference for the same goods.
- Check current notices. Before filing, verify the latest rate notifications, refund instructions, registration scheme rules and the 57th-meeting FAQ listed for 8 October 2026.
Common errors and how to correct them
- Using a generic rate chart: Replace it with the current notification and documented classification for each item.
- Charging the old rate because stock was old: Reassess the outward supply date and section 14 facts.
- Assuming a rate change cancels ITC: Preserve eligible credit, then separately calculate any reversal required for exempt supplies.
- Calling every accumulation “inverted duty”: Test the statutory input-versus-output rate relationship; a temporal change is not enough.
- Treating an announcement as a live procedure: Confirm that the provisional refund, export-consignment amendment or simplified registration route has an operative notification and portal workflow.
- Ignoring tobacco’s transition: Check whether the specific product remains under the earlier GST and compensation-cess rates.
What to verify before your next return
Use the 3 September 2025 Ministry FAQ and the 21 September 2025 PIB explainer as historical explanations of the 2025 transition, but do not assume they replace current law. The GST Council index now lists a 57th-meeting FAQ dated 8 October 2026, and its substantive guidance should be checked alongside current CBIC rate notifications and GST portal instructions.
For a complex classification, mixed taxable and exempt turnover, substantial accumulated credit or a refund claim, have a GST practitioner review the working papers before submission. The key controls are simple: charge the rate applicable to the supply, preserve eligible ITC subject to the Act and rules, reverse credit attributable to exempt supplies, and claim refunds only under a matching statutory category.
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