GST rate changes 2025: what to update in your products and invoices

What changed in the GST rates in 2025?

The 56th GST Council meeting on 3 September 2025 cut the main GST slabs to two, 5% and 18%, effective 22 September 2025. As of October 2026, the position is:

• Two main rates: 5% and 18%.
• A 40% rate for specified luxury and sin goods.
• The 12% and 28% slabs were removed, so items in them moved to another rate.
• Compensation cess was discontinued.
• Item-wise rates come only from the CBIC rate notifications, not from news summaries or this guide.

For a small business the change is mostly practical. Your rate is stored in your billing software, on every product, every draft and every price list. Each of those needs checking once, in a set order.

How do the 2025 changes look on example products?

The table shows four example products, labelled A to D, to show the arithmetic only. The old and new rates here are illustrations of each kind of move, not the rates of any real item. Look up each of your own items on the CBIC notification before you change anything.

Notice that not every move is a cut. An item can go up as well as down, and some stay where they were. That is why a blanket edit of every product is a mistake.

Which GST rate applies to an invoice dated before or after 22 September 2025?

In plain words, the rate follows the time of supply, and for an ordinary sale of goods that is usually the date you issue the invoice. An invoice dated 20 September 2025 carried the old rate. One dated 23 September 2025 carries the new rate.

The edge cases are the ones to take to your CA. The law has a specific rule for supplies that straddle a rate change, for example where goods were sent before the change date but invoiced after it, or where an advance was received under the old rate. The answer depends on the order of three dates: supply, invoice and payment.

1. 1

   20 September 2025: invoice before the change

   Lakshmi Steel Furnitures, Coimbatore (fictional), bills Example A to Ravi Stores at ₹10,000 plus 12%, a total of ₹11,200.

2. 2

   23 September 2025: invoice after the change

   The same product to Sri Murugan Traders now goes at ₹10,000 plus 5%, a total of ₹10,500. The customer pays ₹700 less tax on the same goods.

3. 3

   Straddling cases go to the CA

   If goods left the Main godown on 19 September but the invoice was raised on 24 September, write down all three dates and ask your accountant which rate applies before you post.

Should you edit the existing rate or set a new rate on each product?

Set the correct new rate on each affected product; do not change the percentage inside an existing rate. Editing the old 12% rate to read 5% looks quicker, but it mixes two different taxes under one name.

• Products moving to 5% or 18%: change the rate on the product to the 5% or 18% rate. Every new invoice line then picks it up.
• Products whose rate did not change: leave them alone and tick them off the list.
• The old 12% and 28% rates: keep them, but stop using them on new sales. You still need them for credit notes against old invoices.
• HSN codes: check them while you are on each product. The rate is looked up by HSN on the notification, so a wrong HSN gives a wrong rate.

What should you do with a draft invoice made before the change?

Recheck every draft before posting it, because a draft carries whatever rate the line had when it was typed. If the invoice date is on or after 22 September 2025, the line rate must be the new one.

A draft is the one place a rate can still be fixed on the line itself. Once an invoice is posted, the right fix is a credit note or debit note, not an edit. List your open drafts, open each one, and update the rate on any line that still shows 12% or 28%.

Do credit notes against old-rate invoices keep the old rate?

Generally yes: a credit note reverses the original invoice, so it carries the rate on that invoice, not today's rate. If Ravi Stores returns goods from the 20 September 2025 invoice, the credit note reverses tax at 12%.

Using 5% on that credit note would reverse only ₹100 of tax that was paid at ₹240, and your GSTR-1 would no longer tie back to the original invoice. Credit notes also have a reporting deadline: as of October 2026, 30 November after the end of the financial year or the annual return date, whichever is earlier.

What happens when you bought at 12% and now sell at 5%?

You pay more GST on purchases than you collect on sales, and the extra input credit piles up. This is called an inverted duty structure.

A refund route for accumulated credit from an inverted duty structure exists, but it has its own conditions and formula. See a CA before you apply. In the meantime, the unused credit should stay visible in your books so it is not lost.

How should you document MRP and price revisions?

Write down every price change the rate change caused, with the date and the reason, and keep it with your rate sheet.

• Packaged goods with an MRP: the printed MRP may need a revised price label or sticker. Check the current requirements with your CA or trade association before relabelling.
• Price lists and quotes: reissue them with the new rate and a date. A quote sent before 22 September 2025 with tax at 12% is now wrong.
• Customer contracts with tax-inclusive prices: if a rate fell, the customer will expect the saving to reach them. Agree the new price in writing.

What is the checklist to update your billing for the 2025 rates?

• Download the CBIC rate notification and find each of your items by HSN
• Build a sheet of product, HSN, old rate, new rate and notification line
• Change the rate on each affected product; leave unchanged products alone
• Keep the old 12% and 28% rates for credit notes against old invoices
• Open every draft invoice, quote and price list and update old rates
• Raise any credit note against a pre-change invoice at the original rate
• Note any inverted duty credit and discuss the refund route with your CA
• Record MRP and price revisions with dates and reasons
• After the first month, compare your sales register with GSTR-1 rate by rate

How does SimpleERP handle GST rate changes?

In SimpleERP, tax rates are editable and the rate sits on the product, so you change it once and every new invoice line picks it up. The rate can still be changed on a line before posting, and one invoice can carry mixed rates.

• Rates are seeded at setup and you can edit them as the law changes.
• HSN or SAC sits on every line, set on the product and editable on the line.
• Posted invoices are immutable, so a pre-change invoice keeps its old rate. Cancellation reverses it; nothing is deleted, and the audit history shows who did what.
• A credit note posts the reversal of sales, GST, the receivable and, where goods come back, stock in one step.
• Sales and purchase registers and the HSN summary report give you the figures to check GSTR-1 rate by rate.

Read more on the GST billing software page, or start with the GST billing guide.