GST Amendments 2022 to 2026: Latest GST 2.0, Budget 2026 and Compliance Changes
- GST 2.0 simplified the rate structure around 5%, 18%, and 40%, while keeping exemption or nil-rate treatment for specified items.
- Most GST 2.0 rate changes were recommended as of 22 September 2025, but tobacco and certain related goods continue to be subject to the existing GST plus compensation cess until the compensation cess obligation is discharged.
- Individual life insurance and individual health insurance were recommended for GST exemption. These policies should not be treated as taxable at 5% based on the 56th GST Council recommendations.
- IMS was launched in October 2024. It allows buyers to accept, reject, or keep supplier invoices pending before GSTR-2B is finalized.
- From 1 April 2025, taxpayers with an AATO of ₹10 crore and above cannot report e-invoices, debit notes, or credit notes on IRP after 30 days from the document date.
- From 1 April 2025, MFA/2FA became mandatory for all remaining taxpayers and users of the e-way bill and e-invoice systems. Businesses should ensure registered mobile numbers, sub-users, and OTP access are updated before generating e-way bills or e-invoices.
- Budget 2026 proposed important GST amendments for post-sale discounts, inverted duty refunds, and intermediary services. These should be explained with an effective-date caution, as GST amendments may require a separate notification.
GST 2.0 Rate Changes from September 2025
The 56th GST Council meeting recommended one of the largest GST rate rationalization exercises since GST was introduced. The Council described the revised framework as a simpler structure with a 5% merit rate, 18% standard rate, and 40% special demerit rate for select goods and services. The Council also recommended rate reductions for several goods, such as air conditioners, televisions, and dishwashing machines. Many of these were recommended to move from 28% to 18%.
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GST Rate Changes from 2022
The 47th GST Council meeting in 2022 recommended several rate changes and exemption withdrawals , including changes for pre-packaged and labeled food items, hospital rooms above a specified threshold, cheques, maps, charts, and globes.
| Goods / Services | Earlier GST Rate | Revised GST Rate | Practical Impact |
|---|---|---|---|
| Printing, writing, or drawing ink | 12% | 18% | Increased tax cost for printing, stationery and packaging-related businesses |
| Knives with cutting blades, paper knives, pencil sharpeners, spoons, forks, ladles, and similar items | 12% | 18% | Higher GST on common household and kitchen utility products |
| Power-driven pumps for handling water, including centrifugal pumps, submersible pumps and bicycle pumps | 12% | 18% | Increased tax rate for pump dealers, hardware sellers and agricultural equipment suppliers |
| Machines for cleaning, sorting or grading seeds, grains, pulses and similar milling machinery | 5% | 18% | Significant increase for agriculture and food-processing machinery |
| Machines for cleaning, sorting or grading eggs, fruit or other agricultural produce, milking machines and dairy machinery | 12% | 18% | Higher GST impact for dairy and agri-processing equipment buyers |
| LED lamps, lights, fixtures and their metal printed circuit boards | 12% | 18% | Increased tax rate for lighting products and electrical goods sellers |
| Drawing and marking instruments | 12% | 18% | Higher GST on technical, drafting and marking tools |
| Solar water heaters and systems | 5% | 12% | Increased rate for solar water heating systems |
| Prepared leather, finished leather, chamois leather and composition leather | 5% | 12% | Higher tax impact for leather traders and manufacturers |
| Ostomy appliances | 12% | 5% | Rate reduction for medical and healthcare-related appliances |
| Orthopaedic appliances, splints, fracture appliances, artificial body parts and intraocular lenses | 12% | 5% | Lower GST burden on important medical support products |
| Tetra Pak or aseptic packaging paper | 12% | 18% | Higher GST for packaging used in beverages and dairy products |
| Cut and polished diamonds | 0.25% | 1.5% | Increased GST rate for diamond traders and jewellery businesses |
| Transport of goods and passengers by ropeways | 18% | 5% with ITC of services | Reduced tax rate for ropeway transport services |
| Renting of truck or goods carriage where fuel cost is included | 18% | 12% | Lower rate for transport arrangements where fuel is included in the rental value |
| Cheques, loose or in book form | Nil | 18% | Exemption withdrawn, making cheque supplies taxable |
| Printed maps, charts, atlases, wall maps, topographical plans and globes | Nil | 12% | Exemption withdrawn for printed map and chart products |
| E-waste | 5% | 18% | Higher GST rate for e-waste-related supplies |
| Hotel accommodation priced up to ₹1,000 per day | Exempt | 12% | Budget hotel stays became taxable |
| Hospital room rent above ₹5,000 per day, excluding ICU | Exempt | 5% without ITC | Higher cost for non-ICU hospital rooms above the specified threshold |
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Budget 2026 GST Amendments
Post-Sale Discounts Under Section 15(3)
Budget 2026 proposed to simplify the treatment of post-sale discounts . Earlier, discounts given after supply had to be linked with a prior agreement and specific invoices. The proposed amendment removes that strict linkage, but businesses must still issue a credit note under Section 34 and ensure the recipient reverses proportionate ITC.
This is useful for businesses that give year-end discounts, volume-based incentives, dealer schemes, turnover rebates, and performance-linked discounts. Instead of forcing every discount into a pre-agreed invoice-level structure, the amended wording gives more practical flexibility.
Provisional Refund for Inverted Duty Structure
Budget 2026 also proposed extending 90% provisional refund to inverted duty structure cases. This matters for businesses where GST paid on inputs exceeds GST payable on the final output, resulting in accumulated ITC.
For example, a manufacturer buying inputs at a higher GST rate but selling finished goods at a lower GST rate may face regular ITC accumulation. Faster provisional refunds can improve working capital , but businesses should still maintain invoice-level records and refund documentation.
Intermediary Services and Place of Supply
Budget 2026 proposed the omission of Section 13(8)(b) of the IGST Act. This provision previously treated the place of supply for intermediary services as the supplier's location. Once omitted and notified, intermediary services should generally move to the default place-of-supply rule under Section 13(2), which is based on the recipient's location. This may help Indian service providers working with overseas clients. Export treatment still depends on satisfying the export-of-services conditions under GST.
Invoice Management System and ITC Reconciliation
IMS is one of the most important GST portal changes for ITC management . It was launched on the GST portal from 1 October 2024, with taxpayer actions available from 14 October 2024. Under IMS, invoices uploaded by suppliers through GSTR-1, GSTR-1A, or IFF become visible to the recipient. The recipient can accept, reject, or keep invoices pending.
How IMS Affects ITC Claims
| IMS Action | Practical Impact |
|---|---|
| Accept | Invoice becomes available for ITC flow into GSTR-2B and GSTR-3B |
| Reject | ITC is not made available for that invoice |
| Pending | Invoice is deferred and does not form part of current GSTR-2B |
| No action | Treated as deemed accepted at GSTR-2B generation |
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GSTR-3B, GSTR-1A and Return Filing Changes
GSTR-3B filing has become more system-driven. The GSTN advisory on non-editable auto-populated liability in GSTR-3B states that tax liability is auto-populated from GSTR-1, GSTR-1A, and IFF, and from the July 2025 tax period, such auto-populated liability was to be made non-editable.
This makes GSTR-1 accuracy more important. If outward supply data is wrong, the correction should be made through GSTR-1A or the relevant amendment route, rather than by manually adjusting GSTR-3B.
Also, the GST law now restricts filing of certain returns after three years from their due date. GSTN advisories link this to amendments in Sections 37, 39, 44 and 52, brought through Finance Act 2023 and notified from 1 October 2023.
E-Invoicing Updates
E-invoicing is mandatory for B2B supplies for registered businesses crossing the notified turnover threshold . From 1 April 2025, MFA/2FA is also mandatory for all remaining taxpayers and users of the e-way bill and e-invoice systems. This means businesses should check not only e-invoice applicability and IRP reporting timelines, but also user access, registered mobile numbers, OTP availability, and sub-user setup before generating e-invoices or e-way bills.
| Area | Correct Position |
|---|---|
| E-invoicing threshold | ₹5 crore+ AATO for applicable B2B supplies |
| 30-day IRP reporting limit | ₹10 crore+ AATO from 1 April 2025 |
| Documents covered under 30-day rule | Invoice, credit note, debit note |
| B2C e-invoicing | Not generally mandatory as of this review |
| MFA / 2FA for e-way bill and e-invoice systems | Mandatory for all remaining taxpayers and users from 1 April 2025 |
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ISD and Branch-Level ITC Distribution
Input Service Distributor rules are important for businesses that receive common input service invoices under a single GSTIN and distribute the credit to other distinct persons or branches. The CGST Act defines ISD as an office that receives invoices for input services, including certain reverse charge services, for or on behalf of distinct persons and distributes the eligible ITC. The updated Section 20 framework provides for the distribution of eligible credit by ISD in the prescribed manner.
GST Amendments for E-Commerce and Composition Dealers
From 2023, restrictions on the composition scheme were relaxed for certain suppliers selling goods through e-commerce operators, subject to conditions. This mainly helps small intra-state sellers who sell through platforms but do not want the full compliance load of the regular GST scheme.
However, composition dealers still cannot collect GST separately from customers and cannot issue tax invoices that allow buyers to claim ITC. E-commerce operators also continue to have TCS responsibilities for applicable supplies.
A small seller that sells only within one state, mainly to consumers, and stays within the turnover limit may consider composition. But a seller making interstate supplies, selling to business buyers who need ITC, or planning fast expansion may be better suited to the regular GST scheme.
Compliance Checklist for Businesses
Earlier, GST was not applied to certain food products and grains when they were not branded. The Legal Metrological Act’s exemption range has been revised to exclude prepackaged and pre-labelled retail packets, such as curd, lassi, and buttermilk. The products listed below are not entirely exempted from compliance.
| Compliance Area | What to Verify | Why It Matters | Records to Keep |
|---|---|---|---|
| GST Rate Master | Check whether each HSN or SAC code has been updated according to the latest notified GST rate. Do not update rates based solely on product category names. | Many GST rate changes are item-specific. A broad category-level update can lead to wrong tax collection or wrong invoice values. | Updated HSN/SAC list, old vs new rate mapping, notification reference, approval note |
| GST 2.0 Rate Changes | Identify items that moved from 12% or 28% to a revised rate. Separately review goods where special treatment continues, such as tobacco and related products. | Not every item moves at the same time or in the same way. Some goods may continue under the earlier GST plus compensation cess structure until separately notified. | Product-wise rate change sheet, effective date, stock transition notes |
| IMS and ITC Review | Match supplier invoices in IMS with the purchase register before accepting, rejecting, or keeping them pending. | A wrong IMS action can delay ITC, create mismatch with suppliers, or affect the ITC amount flowing into GSTR-2B. | IMS action report, purchase register, supplier invoice copies, mismatch remarks |
| E-Invoicing Applicability | Check whether AATO crosses ₹5 crore for e-invoicing applicability. For AATO of ₹10 crore or above, ensure invoices, debit notes, and credit notes are reported within 30 days. | E-invoice rules are turnover-based. Missing the 30-day reporting limit can lead to IRP rejection and delayed invoice regularisation. | AATO calculation, IRN report, rejected invoice report, e-invoice logs |
| E-Way Bill and E-Invoice MFA / 2FA | Check whether MFA / 2FA is activated for users and sub-users on the e-way bill and e-invoice systems. Also verify that registered mobile numbers and OTP access are updated. | From 1 April 2025, MFA / 2FA became mandatory for all remaining taxpayers and users. If access is not ready, e-way bill or e-invoice generation may get delayed. | MFA activation proof, user and sub-user list, registered mobile number confirmation, internal access control note |
| Return Filing Data | Reconcile GSTR-1, GSTR-1A, GSTR-3B, e-invoice data, and books before filing. | With system-populated and non-editable fields becoming more common, errors should be corrected at the source instead of relying on last-minute GSTR-3B adjustments. | GSTR-1 summary, GSTR-1A corrections, GSTR-3B working, reconciliation sheet |
| Old Pending Returns | Review whether any old GST returns are still pending and whether the three-year filing restriction applies. | Delayed filing may no longer be possible after the statutory time limit, which can affect compliance closure and past-period corrections. | Pending return list, period-wise filing status, internal compliance note |
| ISD and Branch ITC | Check whether common input service invoices are received at the head office and used by multiple branches or GSTINs. | ISD may be required for distributing eligible ITC on common input services. Cross-charge should not be used as a blanket substitute where ISD treatment applies. | Common expense invoices, ISD registration, ITC distribution working, branch-wise allocation |
| Credit Notes and Discounts | For post-sale discounts, verify whether credit notes are issued correctly and whether the recipient reverses proportionate ITC where required. | Discount treatment affects taxable value, GST liability, and ITC reversal. Poor documentation can create disputes during scrutiny. | Discount scheme note, credit notes, customer confirmation, ITC reversal proof |
| Accounting Software Setup | Check whether GST rates, invoice formats, e-invoice settings, IMS reconciliation, and return reports are updated in the accounting system. | Many GST mistakes happen because the law is updated but the billing or accounting system is not. | Software update log, test invoice, GST report screenshots, user approval |
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Conclusion
GST amendments from 2022 to 2026 show a clear direction: simpler rates, stricter system-based filing, tighter ITC control, faster refunds, and less tolerance for manual correction at the last stage.
For businesses, the biggest practical change is not only the new GST rate structure. The bigger shift is operational. GST compliance now depends on clean invoice data, timely e-invoice reporting, proper IMS review, accurate GSTR-1 filing, and correct branch-level ITC distribution.
Businesses should update their accounting software, tax masters, invoice workflows, return review process, and ITC reconciliation process before filing. This reduces the risk of wrong tax rates, blocked ITC, delayed refunds, supplier mismatches, and GST notices .
