Introduction to GST in India
The Goods and Services Tax (GST) is India’s unified taxation system that replaced multiple indirect taxes, including VAT, excise duty, and service tax. Introduced on July 1, 2017, GST simplified the country’s complex tax structure and created a seamless national market. In September 2025, the 56th GST Council meeting introduced major reforms—a landmark transformation designed to ease compliance, boost consumption, and fuel economic growth.
At RLFinTax.com, we help businesses navigate GST complexities and ensure complete compliance with the latest regulations.
What is GST and why is it Important?
Goods and Services Tax is an indirect tax levied on the supply of goods and services at every stage of the supply chain. GST operates on the principle of taxing only the value added at each stage, eliminating the cascading effect of multiple taxes.
Key Benefits of GST:
The system has created a unified national market, reduced transaction costs for businesses, eliminated tax-on-tax through Input Tax Credit (ITC), and improved tax compliance through technology-enabled reporting. For consumers, GST has brought transparency in pricing and reduced the overall tax burden on essential items.
GST 2.0: Revolutionary Rate Structure Effective September 22, 2025
In a landmark decision, the 56th GST Council meeting approved the most comprehensive GST overhaul since 2017. The previous multi-slab structure (0%, 5%, 12%, 18%, and 28%) has been simplified into a streamlined framework featuring three core rates plus special categories.
New GST Rate Structure
Primary Slabs:
GST Rate | Applicable To | Examples |
0% (Nil-Rated) | Essential items are deemed basic and necessary | Food grains, healthcare services, education, medical devices, lifesaving drugs |
5% (Merit Rate) | Essential and everyday goods | Packaged food, edible oils, milk products, soap, toothpaste, agricultural equipment, small vehicles up to 350cc, EVs |
18% (Standard Rate) | Most standard products and common services | Electronics, mobile phones, cosmetics, appliances, cement, telecom services, rental services |
40% (De-merit/Sin Tax Rate) | Luxury and non-essential goods | Luxury cars, high-end vehicles, aerated drinks, premium consumer goods, online gaming, and casinos |
3% (Special Rate) | Precious metals | Gold jewellery, silver, and precious stones |
Rate Changes from the Previous Structure
The new structure brings significant affordability improvements. Daily-use items like soaps, shampoos, cheese, butter, soya milk, and packaged foods now attract GST of 5%, down from 12-18%. Goods like air conditioners, small cars, TVs, and motorcycles (under 350cc) are now taxed at 18%, reduced from 28%. Essential food items like paneer, roti, pizza bread, and erasers now have nil GST. Meanwhile, the earlier 12% slab has been eliminated, with goods moving to either 5% or 18%.
At RLFinTax.com, we provide detailed product-wise GST rate guidance to help businesses classify their offerings correctly.
Three Types of GST: CGST, SGST, and IGST
GST is divided into three components that work together to create a unified tax system:
CGST (Central GST): Collected by the Central Government on intrastate supplies (goods and services supplied within a state).
SGST (State GST): Collected by respective State Governments on intrastate supplies. SGST rate equals CGST rate, so total intrastate GST = CGST + SGST.
IGST (Integrated GST): Collected by the Central Government on interstate supplies (goods and services supplied across state boundaries). The IGST rate equals the combined CGST and SGST rates. For example, for a 5% GST item, CGST and SGST are each 2.5%, while IGST is 5%.
GST Returns and Filing Requirements
Major GST Return Forms
Businesses registered under GST must file various returns depending on their category and turnover:
GSTR-1 (Outward Supplies):
GSTR-3B (Monthly Summary Return):
GSTR-2A (Inward Supplies Auto-Generated):
GSTR-2B (Monthly ITC Statement):
GSTR-4 (Annual Return for Composition Dealers):
GSTR-9 (Annual Return):
GSTR-9C (Annual Return with Audit):
GST Return Filing Timeline
Monthly Filers:
Quarterly Filers (QRMP Scheme):
Annual Filers:
Important Changes Effective July 2025 to August 2025
The Government has implemented several critical compliance changes:
Non-Editable GSTR-3B (July 2025 Onwards): From the July 2025 tax period, Table 3 of GSTR-3B (outward supplies and tax liability) becomes non-editable. These values are auto-filled from GSTR-1, GSTR-1A, and IFF and cannot be changed during GSTR-3B filing. Any corrections must be made in GSTR-1 or GSTR-1A before filing GSTR-3B.
Introduction of GSTR-1A: This new form allows taxpayers to amend GSTR-1 details within the same tax period before filing GSTR-3B, ensuring corrections don’t miss the compliance deadline.
Three-Year Filing Restriction (August 2025 Onwards): Taxpayers cannot file GST returns after the expiry of three years from the due date. Returns for October 2022 and earlier cannot be filed from December 1, 2025.
Mandatory HSN Code Reporting (May 2025 Onwards): B2B supplies require HSN codes from all taxpayers. B2C supplies require HSN codes only for businesses with turnover exceeding Rs. 5 crore in the previous financial year.
TDS and TCS Under GST
TDS (Tax Deducted at Source):
TCS (Tax Collected at Source):
Input Tax Credit (ITC) and Its Importance
Input Tax Credit allows registered taxpayers to claim credit for taxes paid on inward supplies (purchase of goods and services used for business). This eliminates cascading of taxes and makes GST a true value-added tax.
Key ITC Rules:
Taxpayers must file GSTR-1 to allow buyers to claim ITC on outward supplies. ITC cannot be claimed on personal consumption items or items not used for business. Proper documentation and a GST invoice are mandatory for ITC claim. Blocked credits on items like motor cars (unless for resale), personal consumption, and non-business purchases cannot be claimed.
Composition Scheme for Small Taxpayers
Taxpayers with annual turnover up to Rs. 50 lakh can opt for the Composition Scheme, which offers simplified compliance and lower tax rates.
Composition Tax Rates:
Advantages:
Restrictions:
GST Penalties and Late Filing Charges
Strict penalty provisions ensure timely compliance. The GST department has been issuing substantial penalties for late filings and non-compliance.
Late Filing Penalties for GSTR-3B
Delay Period | Penalty Amount |
Up to 3 months after due date | Rs. 50 per day (CGST + SGST both applicable) |
More than 3 months after due date | Up to Rs. 10,000 or equal to tax amount, whichever is higher |
No tax liability/Nil return | Rs. 20 per day |
Maximum Late Fee Caps (Based on Annual Aggregate Turnover):
Interest on Late Tax Payment
If GST dues are not paid by the due date, interest at 18% per annum is charged on the outstanding tax amount. Interest is calculated daily from the day after the due date till the date of payment.
Example: If Rs. 10,000 GST was not paid on the due date (20th February 2025) and was paid on 22nd March 2025 (30 days delay), interest would be calculated as: (10,000 × 18% × 30) ÷ 365 = Rs. 147.95
General Penalties Under Section 125
The GST department invokes Section 125 of the CGST Act for violations where no specific penalty is prescribed. This can result in additional penalties up to Rs. 25,000 per violation.
Consequences of Non-Compliance
Late filing blocks subsequent return filings, prevents Input Tax Credit accumulation, attracts dual penalties (late fee + general penalty), and may result in notice from GST authorities. In severe cases, GST registration can be cancelled, and business operations can be suspended.
Blocking of Subsequent Returns
If the previous month’s GSTR-3B is not filed, the portal blocks the filing of GSTR-1 for the current month, which cascades into blocking GSTR-3B filing. This creates a chain reaction, preventing compliance.
Recent GST Compliance Updates and Best Practices
Invoice Management System (IMS): Though not yet mandatory, IMS is becoming increasingly important for real-time invoice validation. Businesses are advised to monitor rejections of sales invoices by buyers and take appropriate action in GSTR-1A.
Reconciliation is Critical: With GSTR-3B becoming non-editable from July 2025, accurate reconciliation between GSTR-1 and GSTR-2B before filing GSTR-3B is no longer optional—it’s mandatory.
Documentation and Record Keeping: Maintain all purchase invoices, sales invoices, credit notes, debit notes, and supporting documents for at least 6 years for audit purposes.
Training Staff: Educate accounting teams and staff about GST changes, particularly the non-editable GSTR-3B rule and the three-year filing restriction.
GST Cess
In addition to GST rates, certain items attract an additional cess to fund specific purposes or discourage consumption. Cess rates vary and are applied on top of GST rates.
Items Subject to Cess:
Cess is levied to generate revenue for specific government initiatives and to regulate the consumption of certain goods.
Who Must Register for GST?
Mandatory GST Registration Required:
Optional GST Registration:
GST Registration Process
Documents Required:
Registration Steps:
The process typically takes 3-7 working days for approval.
GST Portal and Technology
The GST Network (GSTN) portal is the central platform for all GST-related activities. The portal provides:
Recent updates include the Invoice Management System (IMS) for better invoice tracking and real-time validation.
Challenges and Solutions in GST Compliance
Common Challenges:
Solutions:
How RLFinTax.com Can Help
At RLFinTax.com, we offer comprehensive GST services including:
Our team of GST experts helps businesses navigate the complex tax landscape, ensure timely compliance, and optimise their tax positions.
Upcoming Developments in GST
GSTAT (GST Appellate Tribunal): The GST Appellate Tribunal has been operationalised to provide an alternative dispute resolution mechanism. Businesses can file appeals starting in September 2025, with hearings scheduled to begin in December 2025.
Further Rate Rationalisation: The Government continues to review GST rates for various sectors to ensure fairness, competitiveness, and revenue generation.
Technology Enhancement: Continued digitalisation through IMS and other technology platforms aims to reduce manual intervention and improve compliance accuracy.
Key Takeaways
Conclusion
Goods and Services Tax has transformed India’s indirect tax system into a unified, transparent, and efficient framework. The 2025 reforms make GST even more accessible by simplifying rates and reducing compliance complexity. However, strict penalty provisions and non-editable returns demand accuracy and timeliness from taxpayers.
Whether you’re a startup, small business, or large enterprise, staying compliant with GST regulations is not just a legal obligation but also a business imperative. Understanding the new rate structure, filing requirements, and compliance deadlines ensures your business operates smoothly while maximising tax benefits through legitimate ITC claims.
Need Professional GST Assistance? Contact the experts at RLFinTax.com for personalised GST compliance, return filing support, and comprehensive tax consulting services tailored to your specific business needs.
About RLFinTax.com
RLFinTax.com is your comprehensive platform for Goods and Services Tax guidance, GST compliance strategies, and financial advisory services. We help businesses of all sizes navigate GST regulations, optimise their tax liabilities, and maintain seamless compliance. Our team of GST specialists and financial advisors is committed to providing accurate, up-to-date information and expert support to help you achieve your business goals.
Disclaimer: This article is for informational purposes only and should not be considered as professional tax or legal advice. GST laws are subject to change, and different states may have additional requirements. For specific GST situations, kindly consult with a qualified GST professional, Chartered Accountant, or tax consultant. RLFinTax.com recommends always verifying the latest GST information from the official GST portal (www.gst.gov.in) and CBIC notifications.