Enterprise Readiness Checklist for GST 2.0: Key Steps for Compliance

A GST readiness checklist will come in handy for all the finance teams to effectively and efficiently implement the changes introduced by the GST 2.0 reforms, while staying compliant. The 56^th GST Council held on 3^rd September 2025 at New Delhi introduced us to the GST 2.0 reforms. Significant decisions were taken for implementing next-gen GST reforms- the two-tier GST rate structure of 5% and 18%, removal of the 12% and 28% slabs, and automated refunds. 

Accordingly, the CBIC has issued notifications on 17^th September 2025 notifying all the GST rate changes, exemptions and amendments to the CGST Rules. Most of the rate changes and new rules apply from 22^nd September 2025, while some are retrospective from 1^st April 2025 or come into effect on 1^st October 2025. 

Key Takeaways

1. GST 2.0 introduces simplified slabs that are easy to understand, reducing classification disputes.
2. Enterprises must realign systems, compliance framework and financial planning. They must be proactive to adapt and comply with new rules.
3. The introduction of digital compliance tools and the removal of GST compensation cess reduce compliance costs and remove bottlenecks, making it easier to start and grow new ventures.

Understanding New GST Slabs

GST 2.0 has introduced new GST slabs, which are rational and simplified.

Rationalised GST slabs by merging 12% and 18% into a standard slab. Essential items are retained at a lower tax slab of 5%. Luxury and Sin goods are placed at a higher rate of 28% with cess. Special concessional rates are introduced for MSMEs and the green economy. There will be a periodic review of rates for any adjustments in the future. For detailed rates, please refer to our page - New vs Old GST Rates. 

Enterprise Readiness Checklist

What should businesses prepare for with this change? – Manage transitional supply. With the rate changes stated to be implemented, businesses must apply the correct GST rates on all transactions overlapping the effective date.

It is important to note here that the time of supply under section 14, in case of changes in tax rates, the time of supply, i.e., date of determination of liability to pay GST, depends on the following events:

• Date of invoice issuance.
• Date of payment receipt.
• Date of supply of goods or services.

The simplest way to understand which rate shall apply is to check the above dates and apply to following simplified logic:

• If two of these events occur after the rate change – New tax rate applies.
• If two of these events occur before the rate change – Old tax rate applies.

System changes

• Updating Accounting and ERP systems to align with 5% and 18% slabs and updating inventory databases to reflect new tax rates.
• Refund process enhancement (effective from 1st November 2025), prepare for 90% provisional refunds for exporters based on risk assessment, for cases with an inverted duty structure and understanding that the threshold for tax-paid exports will be removed, which would benefit small exporters.
• Enterprises are suggested to perform HSN code audits for all products to ensure they are correctly classified under the new tax structure. This requires cross-referencing against updated rate schedules and documenting the rationale for classification to avoid future disputes.

Compliance shift

• Invoice format changes: Enterprises must ensure all invoices generated on or after 22nd September 2025 for supplies made afterwards.
• Invoicing for transitional supplies- Businesses must properly handle transactions that overlap with the effective date of the rate changes, such as advances received before 22nd September for supplies made afterwards.
• Contract Renegotiations- Ongoing contracts with vendors, suppliers and customers should be reviewed to align with new tax terms, preventing potential disputes.
• Automated GST registration: From 1^st November 2025, a new optional simplified registration scheme will allow small and low-risk businesses, including suppliers via e-commerce operators, to obtain GST registration within three working days, fully automated.

Business operational changes

• Enterprises are allowed to voluntarily update the MRPs using stickers or online printing for the stock manufactured before 22nd September 2025.
• Manage supply chain costs: The reduced GST on transport, cement, and specific industrial inputs will affect logistics costs. Businesses must re-evaluate their overall supply chain expenses to pass on the savings and remain competitive.
• Resolve inverted duty structure (IDS): The reform addresses the long-standing issue of IDS in sectors like textiles and fertilisers. Manufacturers in these industries will see improved cash flow, as their raw materials now face a lower tax than before.
• Handle provisional refunds: Businesses, particularly exporters and those with an inverted duty structure, can now claim provisional refunds for 90% of their claims from November 1, 2025, based on risk assessment. This will help with working capital management.

Finance decisions

• Cash Flow Management: Changes in tax rates can affect the timing of tax payments and the amount of cash flow available, requiring careful cash flow planning. 
• Impact on Consumer Behaviour: Businesses should consider how price changes driven by the new GST rates will affect consumer demands and their overall sales.
• Government Initiatives: Keeping abreast of government initiatives related to tax exemptions and the acceleration of input tax credit refunds can help businesses mitigate potential issues

Transition Tips

1. If advances were received before the change and GST was paid at the old rate, and the supply occurs later, businesses need to adjust their liability via credit notes.
2. In case there are price revisions post rate change, businesses need to issue supplementary invoices or credit notes promptly to reflect the revised GST treatment.
3. If a supply becomes exempt from 22^nd September 2025, ITC, which is already available in the electronic credit ledger, can be used for outward liabilities till 21^st October 2025. 
4. ITC, which is attributable to exempt supplies, must be reversed. However, if a supply becomes nil-rated, the available ITC can still be used to offset the GST liability on other taxable supplies.
5. Businesses must apply new GST rates for all the existing stock after 22nd September 2025.
6.  All the e-way bills will remain valid after the new GST rates take effect, there will be no cancellation or regeneration of e-way bills required for goods in transit.

The wide-ranging reforms will improve the lives of our citizens and ensure ease of doing business for all, especially small traders and businesses,” PM Modi said.  Providing a simplified tax structure with reduced costs for specific sectors, this reform aims to boost the economy and streamline compliance for businesses.