The 56th GST Council recommended a two-rate 5% merit and 18% standard structure, with a special 40% demerit rate for selected supplies. Most changes took effect on 22 September 2025; specified tobacco products remained on the existing GST and compensation-cess treatment until separately notified.
Start with the law effective on the transaction date
This article was checked against official GST material available on 2026-07-29. Rates, exemptions, thresholds and portal steps can change. Match the exact supply, HSN/SAC, parties, state, place of supply and effective date to the implementing notification.
Do not file from a secondary headline alone. Keep the notification, classification working, invoices and reconciliations supporting the treatment.
What GST 2.0 changed
The reform rationalised the earlier four-tier structure, reduced rates on many common-use, health, agriculture, automotive and labour-intensive supplies, and introduced a special demerit rate for selected goods and services.
Effective-date rule
Apply the transition and time-of-supply provisions where supply, invoice and payment straddle 22 September 2025. Tobacco categories named in the official FAQ did not switch on the general effective date.
Major sector changes
Council materials identify lower rates for individual health/life insurance, medicines and medical devices, small cars, buses/trucks, cement, appliances, agriculture equipment, renewable energy, hotels up to the notified value and personal well-being services.
What did not change
The official FAQ says the goods-registration threshold did not change. Businesses should not treat rate rationalisation, pre-filled data or refund automation as removal of statutory registration, invoice or return requirements.
Business transition checklist
Freeze opening stock by HSN, update ERP rates/effective dates, review open purchase and sales orders, issue debit/credit notes correctly, update MRP where required, communicate contract tax clauses and test e-invoice/POS mappings.
Evidence hierarchy
Start with the implementing CBIC notification, then official Council FAQ/circulars, portal advisories and statutory provisions. A Council recommendation explains policy but the notified legal text controls invoicing.
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Request GST supportFrequently asked questions
When did most new rates start?
22 September 2025.
Are the main slabs now 5% and 18%?
Yes, with a special 40% demerit rate for selected supplies.
Did the goods-registration threshold change?
No, according to the official 56th Council FAQ.
Did tobacco rates change immediately?
Specified tobacco products remained under existing treatment pending separate notification.
Can a recommendation alone change an invoice?
Use the implementing rate notification and effective date.
Should old stock use the old rate?
GST generally follows time-of-supply rules, not merely purchase date; review transition facts.
