The Goods and Services Tax (GST) system in India has undergone a major reform in recent months, with the view of making it easier to comply, more transparent and enhancing economic growth. These modifications that are to be implemented on September 22, 2025, will be a decisive move in the taxation realm of the nation. This blog explores the major changes in the GST laws, their effects on businesses and consumers and the overall economic effects.
Overview of GST Rate Structure
The biggest reform is the simplification of the GST rate slabs. India had a variety of tax rates in the past, with 12 percent and 28 percent. The system has been simplified by the GST Council as of September 22, 2025, into three main slabs:
- 5 percent: This applies to basic goods and services.
- 18 percent: The rate of most goods and services.
- 40 percent: on luxury and sin products like pan masala, tobacco, soft drinks, luxury cars, yachts, and aeroplanes.
This rationalisation is intended to simplify, increase transparency and make it simpler to comply with businesses and consumers.
Reduction of GST Rates on Essential Goods
In order to ease the financial burden on consumers, the government has decreased GST rates on a few basic goods:
- Medicines: GST on 33 life-saving drugs is now NIL instead of 12% and on 3 medicines that are essential in cancer and rare diseases is now reduced to NIL instead of 5%.
- Cement: GST on cement has been cut down to 18 percent.
- Handicrafts and Marble Products: GST has been cut down by half on labour-intensive items such as handicrafts, marble and granite blocks.
These cuts are to achieve affordability and availability of basic commodities to the masses.
Introduction of a 40% GST Slab
Luxury and sin goods have also received a new 40 percent GST slab. This covers such things as pan masala, tobacco, soft beverages, luxury vehicles, yachts, and aircraft. This is aimed at deterring the use of unnecessary and dangerous products and creating more revenue for the government.
E-Way Bill Mandatory and E-Invoicing Mandatory
To simplify the tax collection procedure and minimise tax evasion, the government has introduced stricter e-invoicing and e-way bill laws:
- E-Invoicing: By April 1, 2025, businesses with an Annual Aggregate Turnover (AATO) of more than Rs. 10 crore will be subject to the 30-day time limit regarding reporting e-invoices, reduced by Rs. 100 crore.
- E-Way Bill Validity and Generation: Effective starting January 1, 2025, E-Way Bills can now only be generated with a date within the previous 180 days. Also, E-Way Bills extensions are limited to 360 days since they were initially generated.
These are done in order to increase compliance and minimize the amount of fraud available.
Input Service Distributor (ISD) Registration Requirement
Beginning April 1, 2025, multiple GST-registered businesses that have one PAN must acquire an Input Service Distributor (ISD) registration. This transition requires the application of ISD invoices and GSTR-6 returns in order to allocate the input tax credit (ITC) to different branches to achieve a more efficient traceability and standard reporting.
Increasing the strength of GST Compliance and Enforcement
To enhance GST compliance and enforcement, the government has come up with a number of measures:
- Mandatory Multi-Factor Authentication (MFA): Starting April 1, 2025, all taxpayers are required to use MFA to access the e-way bill or e-invoice system, which would make them safer and minimize cases of unauthorized access.
- Sequential Filing of GSTR-7: Starting November 1, 2024 Tax Deductors as per Section 51 of CGST Act, 2017 must file GSTR-7 returns in a strict order. The objective of this reform is to enhance TDS compliance, simplify the operations of the reconciliation, and increase the transparency of the GST framework.
GST Appellate Tribunal (GSTAT) was set up
The government also, in 2024, created the GST Appellate Tribunal (GSTAT), and a President was appointed to manage it. This tribunal will also seek to streamline the settlement of disputes on GST issues, which offers a special avenue of appeal, improving the efficiency of dispute resolution procedures.
The Improvements in the GST Refund Process
The government has also created procedures for rapid GST refunds, and it has taken no time at all to process and distribute payments. The amendments promote liquidity to businesses and timely refunds, allowing for cash flow and efficiency.
Affect Consumer Goods and Retail Sector
GST reforms have recently had a big effect on the consumer goods and retail industry:
- Electronics and Appliances: GST cuts have boosted the demand for appliances such as televisions, air conditioners and refrigerators. The Navratri and Diwali seasons have witnessed record sales by retailers.
- Automobiles: The drop in GST has boosted the automobile industry, and sales and production have gone up. The introduction of GST 2.0 and the festive season greatly improved the sales of two-wheelers.
Conclusion
The recent changes in GST legislation represent a significant advancement in simplifying indirect taxation and ensuring compliance in India, thereby supporting economic growth. Reduced taxes on costs for both business-related activities and consumers, along with simplified procedures, represent a ‘win-win’ for businesses and consumers. Stakeholders should remain vigilant and closely monitor these items to take full advantage of the benefits afforded under the new GST structure.
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Frequently Asked Questions
1. What are the new GST slabs?
Since September 22, 2025, GST consists of three rates: 5 percent on essentials, 18 per cent on usual goods and services and 40 percent on luxury and sin goods.
2. What were the lowered GST rates?
There are 33 lifesaving drugs and 3 critical medicines which are now NIL-rated. Cement fell to 18 and 28 percent, handicrafts, marble and granite block to 5 and 12 percent.
3. What falls under the 40% slab?
Luxury and sin products such as aerated beverages, luxury automobiles, watercraft, aircraft, pan masala and tobacco.
4. Who is to adhere to e-invoicing?
Companies whose turnover exceeds Rs. 10 crore are required to do so. The e-way Bills have a duration of only 180 days.
5. What are the impacts of these reforms on the stakeholders?
Businesses will experience easier compliance and speedier refunds, and consumers will get reduced rates and transparency.
