Goods and Services Tax (GST) 2.0 reform, which came into effect from September 22nd, 2025, brought relief for the common people and boosts for businesses. One of the key GST updates under 2.0 reform is that it simplified the GST tax structure from a 4-slab (5%, 12%, 18% and 28%) to a 3-slab (5%, 18% and 40%). GST Council, however, meets every quarter to improve the system.

The last GST Council meeting took place on September 3rd, 2025, which was the 56th meeting. These GST updates simplify the compliance for the 6.3 crore+ micro, small, and medium enterprises (MSMEs) operating. In this blog, we will understand the importance of GST updates and amendments in India.

Why do GST Updates Matter?

The GST Council regularly revises GST rates, rules and procedures to ensure the tax system stays fair and efficient. It is also revised to reflect economic conditions and needs. Here are all the reasons why GST updates matter for both businesses and individuals:

• Changes in goods and services tax affect all aspects of product pricing, profit margins, and compliance for all businesses.
• New GST rates affect all three areas of a company’s procurement, invoicing, and contracts.
• Non-compliance with GST rules and regulations can result in penalties (₹25000 per return), delayed refunds, and interest charges on outstanding GST liabilities. These are often the greatest challenges faced by small and medium enterprises (SME).
• Each GST budget 2025 reform indicates that the government is working to attain an optimal balance between achieving its fiscal objectives and simplifying compliance for businesses.
• The GST Council meeting often revises tax rates on goods and services. Knowing the latest GST news helps you price the product correctly.

Latest GST Changes 2025 (Rates, Compliance, Tax Slabs)

GST 2.0 reform is among the most complete overhauls made to it since its inception in 2017. These changes not only simplify compliance for businesses but also help create a more efficient use of technology throughout all businesses.

Tax Rates

• Elimination of the 12% and 28% GST rates.
• The council made a large step towards simplifying GST rates by changing from a 4-tiered rate system to a 2-tiered rate system.
  • 5% slab for merit/essential goods and services.
  • 18% slab for most other goods and services.
• Demerit goods will be taxed at 40%.
• Daily necessities such as soap, toothpaste, and shampoo will now fall into the merit rate of 5%.
• Electronic appliances such as air conditioners and televisions will now fall under the standard rate of 18%.
• Introduction of a distinct 40% or luxury/sin goods slab (to products such as tobacco, luxury cars, high-end motorcycles, yachts, etc).
• Individual life insurance and health insurance policies are fully exempt from GST.
• Fertiliser additions, such as sulphuric acid, drop from 18% to 5%.​
• Renewable energy devices drop from 12% to 5%. Automobiles and electronics drop from 28% to 18%. Hotel rooms ≤ ₹7,500 per day shift from 12% to 5%.
• Agriculture/farm-machinery inputs: e.g. drip irrigation systems, sprinklers, small tractors and tractor tyres transferred into 5% slab.
• 33 life-saving drugs were transferred to nil rate; numerous medical devices and diagnostic kits were transferred to 5%.

Compliance & Procedural Changes

• Easier GST registration process for micro suppliers who sell through E-Commerce operators.
• From April 1, 2025, Input Service Distributor (ISD) registration will be compulsory for businesses having multiple Goods & Services Tax Identification Numbers (GSTINs).
• The time limit for the validity of an E-Way bill will be 180 days, and it can be extended to 360 days.
• From the fiscal year 2025-26, the E-Invoice system would be applicable for businesses having an aggregate turnover exceeding ₹10 crores.
• All GST portal users shall have to apply Multi-Factor Authentication (MFA).
• From February 11, 2025, the formats of GSTR-7 and GSTR-8 will be updated. This means that details about Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) at the invoice level will have to be entered into these forms.
• The minimum amount required to claim refunds (when exporting under tax payment) will be eliminated (i.e. exporters through post/courier will be at ease).
• The Goods and Services Tax Appellate Tribunal (GSTAT) is to be operationalised. Appeals must be filed before 30 June 2026, and hearings should commence before 31 December 2025.

Impact of GST Updates on SMEs

GST updates in India directly impact the small and medium-sized businesses (SMEs):

Positive Gains

• The lower cost of inputs due to reduced GST rates on all machinery and essential products (such as soap and textile goods at 5%) and agricultural tools. This helps to fix inverted duty structures and provide positive cash flow.
• Exemptions of individual life and health insurance will reduce operating costs for SME’s, allowing them to direct additional funds into their business expansion.
• The simplified slabs of 5%/18% will also eliminate most classification disputes. It will simplify GST compliance and record keeping, which improves your chances of approval when you apply for a business loan.
• Provisional refund payment of 90% within a shorter time frame than previous years, and the introduction of automation will improve working capital for small taxpayers.
• Competitive advantages for manufacturing equipment and beauty services at a 5% rate of GST.

Challenges Faced

• Transitions between GST rates can create valuation problems for inventory held under older slabs. It will require adjustment through credits that may disrupt short-term financial situations for some SMEs.
• Updating billing systems and training staff on changes in tax structure may add costs, particularly with technology being limited in SME’s as mandated under MFA requirements.
• Compressing profit margins for SMEs in tobacco or high-end retail due to the 40% demerit category of goods (such as luxury items).
• Revisions of ITC and refund processes can further strain working capital during transitions and delay claims for the inverted duty sectors.
• Multi-state registration and up to 36 monthly returns will continue to place an additional burden on companies with sales over ₹5 crores. Loss of composition exemption for e-commerce SMEs.

Tips for Businesses to Stay Ahead During GST Updates in India

Here are the tips you can follow to stay ahead of the GST changes 2025:

• Identify which products or services will be subject to the new 5%, 18% & 40% GST rates.
• Sell out of existing inventory at the previous GST rate quickly to prevent price discrepancies.
• Update your accounting and billing systems to reflect the most recent GST updates in India.
• Review your company’s ITC (input tax credit) and reconcile it.
• Provide training to employees on filing refunds, determining the location of supply of goods/services, and maintaining documentation.
• Follow the new GST budget 2025 for additional notices from the GST department.
• Keep all of your GST documentation up to date, as well as organised, as banks and Non-Banking Financial Companies (NBFCs) use it as income proof to approve a business loan.
• Review rate-linked clauses to prevent future disputes.
• Utilise digital GST compliance solutions that are compatible with the New GSTN APIs.
• Obtain assistance from a qualified tax consultant if you have any specific questions about GST updates in India.

The 56th GST Council Meeting marked a turning point in India’s indirect tax system with the rollout of GST 2.0. For businesses, especially MSMEs, these changes offer both opportunities and responsibilities. As a business owner, you must act quickly to update your technology and revise your rate structure to stay in compliance.

Staying current on the GST latest news and updates allows you to maintain proper compliance. It allows you to keep your business legally sound, and lenders evaluate your loan eligibility. You can get a business loan with ease.

Frequently Asked Questions (FAQs)

1. What will be the new 2025 GST rate structure?

GST 2.0 reform abolished the old tax structure (5%, 12%, 18% and 28%). The council introduced the new 2-slab structure of 5%, 18% and 40% for demerit.

2. How can GST updates impact the cost of insurance?

The GST changes in 2025 will lower premiums due to exemptions covering all individual life and health policies.

3. Are ISDs mandatory under the GST changes 2025?

Yes, starting from April 1 2025, the ISD mechanism under GST has become mandatory for all eligible businesses.

4. How do GST updates in India influence export-oriented SMEs?

They are positively influenced by 90% provisional refund options and streamlined documentation for zero-rated supplies.

5. Should businesses change their invoicing system after the GST changes in 2025?

Yes, to reflect new rates, you must change your invoicing system to reflect the new changes, ensure proper ITC claims, and comply with E-Invoice requirements.

6. What does ‘rationalisation of GST rates’ mean?

‘Rationalisation of GST rates’ means merging multiple slabs into fewer and simpler ones to remove confusion and reduce inverted tax.

7. How will GST updates assist small and medium-sized enterprises (SMEs)?

Smaller businesses will see lower input costs, easier compliance and quicker returns.

8. Does GST compliance affect my business loan eligibility?

Financial institutions such as DMI Finance review your company’s GST compliance history when you apply for a business loan. A proper GST record improves your chances of business loan approval.

9. How often does the GST council meet?

The council meets once every quarter, though it can meet more often when major reforms or clarifications are required.

10. What are the new refund rules?

From November 1, 2025, 90% of refunds for inverted duty and zero-rated supplies will be processed automatically using a risk-based system.