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GST updates 2025-26: what changed for small businesses

GST 2.0 cut most goods to 5% or 18% from 22 September 2025, GSTR-3B sales figures are now locked, and returns older than three years can no longer be filed. On 8 October 2026 the 57th GST Council recommended a late-fee waiver and lower penalties, which are not in force yet. Every item below says whether it is live, what to do, and where it comes from.

In force now

These changes are notified and live on the GST portal. Each one needs something from you.

In force22 September 2025

GST 2.0: two main rates, 5% and 18%, plus 40%

  • The 5 / 12 / 18 / 28% structure became two main rates: 5% (merit) and 18% (standard). A 40% rate applies to a short list of sin and luxury goods.
  • Many daily-use goods moved to 5% or Nil, including packaged foods, soap, toothpaste and kitchenware. UHT milk, paneer and Indian breads moved to Nil.
  • Small cars, motorcycles up to 350cc, TVs, air conditioners and cement fell from 28% to 18%.
  • Hotel rooms up to ₹7,500 a day, gyms, salons and yoga centres moved to 5%.
Who it affects
Every registered business, most of all FMCG, retail, auto dealers, building material traders, salons, gyms and budget hotels.
What to do
Check the rate on every HSN or SAC code in your item master. If your output rate fell to 5% while inputs stay at 18%, you may now build up input tax credit, so look at the inverted-duty refund below.

Source: GST Council — 56th meeting press release · PIB — FAQs on the 56th GST Council recommendations

In force22 September 2025

Individual life and health insurance exempt from GST

  • GST is Nil on individual life policies (term, ULIP, endowment) and individual health policies, including family floater and senior citizen cover.
  • Group policies are not covered and stay taxable.
Who it affects
Businesses that buy individual policies for owners or staff, and insurance agents and brokers.
What to do
Stop expecting GST, and input tax credit, on individual policies. Check whether each employee policy is individual or group.

Source: GST Council — 56th meeting press release · PIB — FAQs on the 56th GST Council recommendations

In force1 February 2026

Tobacco and pan masala move to 40%; new health cess

  • Tobacco products held back on 22 September 2025 moved to the 40% rate (bidi at 18%), replacing compensation cess.
  • A Health Security se National Security Cess now applies to pan masala on top of GST.
Who it affects
Tobacco and pan masala manufacturers, distributors and retailers.
What to do
Update rates and cess fields in billing for these items. For everything else, there is no compensation cess left to charge.

Source: PIB — FAQs on the Health Security se National Security Cess

In forceFrom the July 2025 tax period (returns filed from August 2025)

GSTR-3B sales liability can no longer be edited

  • Output tax auto-filled into GSTR-3B from GSTR-1, GSTR-1A and IFF is locked. You cannot change it in GSTR-3B.
  • Corrections go through GSTR-1A, filed before GSTR-3B.
Who it affects
All regular taxpayers, monthly and quarterly.
What to do
Reconcile sales against GSTR-1 before its due date. Fix mistakes in GSTR-1A before you file GSTR-3B.

Source: Taxmann — GSTR-3B tax liability to be non-editable (quotes the GSTN advisory of 7 June 2025) (secondary source)

In forcePortal blocking from 1 August 2025

Returns older than three years can no longer be filed

  • GSTR-1, GSTR-3B, GSTR-4, GSTR-9 and other returns are barred once three years have passed from their due date.
  • The law dates from the Finance Act 2023; the GST portal started enforcing it from the July 2025 tax period.
Who it affects
Anyone with old pending returns, including businesses whose registration was cancelled.
What to do
File every pending return that is still inside the three-year window. A barred return cannot be filed at all.

Source: TaxGuru — GSTN advisory on expiry of pending returns (18 June 2025) (secondary source)

In forceFrom the October 2025 tax period

Invoice Management System: pending credit notes and ITC reversal

  • Buyers can keep some supplier credit notes pending for one tax period.
  • Buyers can declare how much input tax credit they reversed on each record.
  • GSTR-2B still generates on the 14th, and IMS action stays optional.
Who it affects
Every business that claims input tax credit.
What to do
Review IMS every month before filing GSTR-3B, especially supplier credit notes. Rejecting a credit note changes your supplier's liability too.

Source: EY — GSTN advisory on changes to the Invoice Management System (secondary source)

In forceLaunched 24 September 2025

GST Appellate Tribunal is open

  • GSTAT has a Principal Bench in New Delhi and state benches across the country. Appeals are filed online.
  • The special window for older orders has closed. New appellate orders follow the normal three-month limit.
Who it affects
Any business with a first-appeal order against it.
What to do
Diarise three months from the date each appellate order is communicated, and budget for the pre-deposit.

Source: PIB — Launch of the GST Appellate Tribunal

In force1 April 2025

E-invoices must reach the IRP within 30 days (turnover ₹10 crore and above)

  • Businesses with aggregate turnover of ₹10 crore or more cannot report an invoice or credit note to the IRP more than 30 days after its date.
  • The e-invoicing threshold itself is unchanged at turnover above ₹5 crore.
Who it affects
Businesses with turnover of ₹10 crore and above.
What to do
Generate the IRN when you raise the invoice. Do not batch uploads at month-end.

Source: Taxmann — 30-day limit for reporting e-invoices (quotes the GSTN advisory) (secondary source)

In force1 November 2025

Registration in three working days for small B2B sellers

  • Under the optional Rule 14A, applicants whose monthly output tax on sales to registered buyers is ₹2.5 lakh or less get registration electronically within three working days of Aadhaar authentication.
Who it affects
New small registrants, especially those selling mostly to consumers.
What to do
If you are registering a new GSTIN and your B2B tax will stay under ₹2.5 lakh a month, choose Rule 14A and complete Aadhaar authentication.

Source: TaxGuru — Rule 14A simplified registration (secondary source)

In forceClaims filed from 1 October 2025

90% provisional refunds for low-risk claims

  • Low-risk zero-rated refund claims, and inverted-duty claims, get 90% sanctioned provisionally based on a system risk score.
Who it affects
Exporters, and businesses whose inputs are taxed higher than their outputs.
What to do
If you buy at 18% and sell at 5%, file inverted-duty refund claims. Clean filing history gets money back faster.

Source: GST Council — 56th meeting press release

Announced, not yet in force

Recommended by the GST Council or enacted by Parliament, but not yet notified. Nothing changes for a filer until the notification is issued.

Announced, not yet in forceRecommended 8 October 2026. Not in force until notified.

57th GST Council: late-fee waiver, lower penalties, more ITC

  • Late fee waived for taxpayers with turnover up to ₹5 crore who file by the end of the month the return was due.
  • General penalty cut from ₹25,000 to ₹10,000, and no show-cause notice where total tax is under ₹10,000.
  • Arrest power under section 69 to be removed, and the prosecution threshold raised from ₹1 crore to ₹5 crore (needs an Act amendment).
  • Several blocked credits under section 17(5) opened up, including outdoor catering, health and life insurance, and free samples.
  • Refund of input-services credit in inverted-duty cases for credit taken from 1 November 2026; capital-goods credit from 1 April 2027.
  • Automatic registration for small e-commerce sellers (new Rule 14B).
  • A GSTR-3B and IMS correction mechanism from the April 2027 return period, after public consultation.
  • E-invoicing extended to reverse-charge purchases from unregistered persons and imports of services, for turnover of ₹5 crore and above.
Who it affects
Almost every small business, once the notifications are issued.
What to do
Nothing changes yet. Watch for the notifications, especially the late-fee waiver, Rule 14B and the April 2027 return changes.

Source: PIB — Recommendations of the 57th GST Council meeting

Announced, not yet in forceEnacted 30 March 2026. Sections 153 to 155 not yet notified at our last check.

Finance Act 2026: post-sale discounts and refund changes

  • Post-sale discounts allowed through a credit note without a prior agreement, provided the buyer reverses the input tax credit.
  • 90% provisional refund written into law for inverted-duty claims.
  • Already in force from 30 March 2026: the place of supply for intermediary services is now the recipient's location.
Who it affects
Distributors and dealers who give or receive post-sale discounts, and service exporters.
What to do
Keep following Circular 251/08/2025-GST for discounts until the new sections are notified.

Source: Taxscan — Post-sale discounts after Finance Act 2026 (secondary source)

Proposed or discussed only

Approved in principle or recommended as a pilot, with no rules or dates yet.

Proposed onlyApproved in principle on 8 October 2026. No design or date yet.

Quarterly scheme for B2C-only businesses (ARQP)

  • An optional scheme with quarterly payment and an annual return for businesses that sell only to consumers and have turnover up to ₹5 crore.
Who it affects
Small retailers, restaurants and other B2C-only businesses.
What to do
No action. Keep filing as you do today.

Source: PIB — Recommendations of the 57th GST Council meeting

Proposed onlyRecommended in September 2024. No live rollout found.

B2C e-invoicing pilot

  • The 54th GST Council recommended a voluntary pilot of e-invoicing for sales to consumers in selected sectors and states. The e-invoice portal still describes it only as a possible pilot.
Who it affects
B2C sellers, if and when it is rolled out.
What to do
No action.

Source: PIB — Recommendations of the 54th GST Council meeting

How we keep this page accurate

Every item links to the publication it was checked against. Government sources (PIB, the GST Council, CBIC, GSTN) are preferred. Where the GST portal advisory could not be opened, the item cites a tax publication that quotes it and says so. This page was last checked on October 10, 2026. It is general information, not tax advice.

Frequently asked questions

What are the GST rates after GST 2.0?

From 22 September 2025 GST has two main rates, 5% and 18%, plus a 40% rate for a short list of sin and luxury goods. The earlier 12% and 28% slabs were removed. Special rates still apply to gold, silver and diamonds.

Is the late fee waived for small taxpayers?

Not yet. On 8 October 2026 the 57th GST Council recommended waiving the late fee for taxpayers with turnover up to ₹5 crore who file by the end of the month the return was due. It takes effect only once it is notified.

Can I still edit my sales liability in GSTR-3B?

No. From the July 2025 tax period, the output tax auto-filled into GSTR-3B from GSTR-1, GSTR-1A and IFF is locked. Correct mistakes through GSTR-1A before you file GSTR-3B.

Can I file a GST return that is more than three years late?

No. Since August 2025 the GST portal blocks returns once three years have passed from their due date. File any pending return while it is still inside that window.

When was the last GST Council meeting?

The 57th GST Council meeting was held in New Delhi on 8 October 2026. Its recommendations, including a late-fee waiver, lower penalties and wider input tax credit, take effect only when notified.

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Authoritative sources

GST rules change frequently. Always verify the current position with the official GSTN sources below before filing.

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