New GST Rates Effective Date 2025: From When Will Revised GST Rates Apply?

56th GST Council meeting, held on 3rd September 2025, highlighted landmark decisions to significantly rationalise and simplify GST rates and compliance. This article discusses the revised GST rates 2025 effective date, applicability and exceptions in detail.  

What are the New GST Rates for 2025? 

The principal change in GST rates for 2025 is the simplification of the previous 4-slab and multi-layered rate structure into a more straightforward, fewer slabs of GST rates. It means the 12% and 28% GST brackets no longer exist, and items falling under those slabs are moved to either of the following slabs-

• 5% for merit or essential goods 
• 18% for standard goods 
• 40% for demerit or sin goods  

Effective Date of New GST Rates in 2025 

The new GST reform effective date is 22nd September 2025. It means the GST rate change effective date is from 22nd September 2025, with the exception of tobacco and its products. 

In the revised structure, luxury and sin goods, such as luxury cars, yachts, carbonated drinks, online gambling, etc, are charged a 40% GST rate from 22nd September 2025. 

Even tobacco, pan masala, cigars, and cigarettes are charged a 40% GST rate under the new GST regime, but this will take effect from a date yet to be notified. The 40% tax applies to tobacco and its products until the compensation liability of the union government is discharged fully. Until then, these goods are taxed at 28% GST, along with a compensation cess. 

Transition Rules for Businesses 

There is a major revision in the GST rates expected to cause businesses several challenges related to invoicing of previous stocks, inventory management, ITC claims and other GST compliance. To make the transition smoother, the Central Board of Indirect Taxes and Customs (CBIC) has issued several key rules- 

1. After 22nd September 2025, businesses have to sell their goods and services at the revised rates, except for tobacco and related sin goods. 
2. The packages manufactured before but sold after 22nd September can have the old MRP along with the revised MRP for better transparency. Relabelling can be done using stickers or any similar measures. However, pharma manufacturers and marketers are exempt from recall/re-stickering requirements by the National Pharmaceutical Pricing Authority (NPPA).
3. For packages manufactured after 22nd September 2025, businesses can make decisions on how to transfer the benefits of the rate cut to consumers - reduce prices, increase the package content or use any other means.   
4. For goods and services (e.g., individual life and health insurances) that have been exempt from GST in the 56th GST Council Meeting, businesses have to reverse the claimed ITC. ITC is available for adjusting with outward tax liability till 21st September 2025.   
5. Businesses must update their ERP and invoicing systems before 22nd September 2025 for accurate calculation of tax liability and compliance. 

Impact of Revised GST Rates on Key Industries 

The simplification of GST rates is going to have various industry-specific impacts- 

• FMCG - GST rates for lots of essential products will be cut down from 12%/18% to 5% increasing the market demand. 
• Automobile - Prices of under-4 meter cars have been slashed from 28% to 18%, including auto parts. increasing demand for small cars. Luxury four-wheelers and premium two-wheelers (Beyond 350 cc engine capacity) will now attract 40% GST instead of the earlier 50% (28%+22%cess).
• Consumer durables -  GST rates for durable goods like AC, TV above 32 inches, computer monitors and washing machines have been slashed from 28% to 18% making them affordable ahead of the festive season.
• Insurance sector - Individual life and health insurance policies have been made tax-exempt under the revised GST rate structure, reducing prices for individual/retail customers.