56th GST Council meeting held on 3rd September, 2025, was a “Next Generation GST Reform” and it came with major amendments in GST rates of Goods or services. GST Rates on various essential goods were reduced from 28% to 18%, from 18% to 5% and from 18%/5% to NIL, such as Health Insurance, Life Insurance, Motor Vehicles, Cement, etc.
However, such key amendments raise various questions and ambiguity in the minds of taxpayers and the Common man. Therefore, the CBIC is taking all necessary steps to ensure that taxpayers have answers to their basic questions. CBIC has issued Frequently Asked Questions-2 on the decisions of the 56th GST Council vide press release dated 16th September, 2025.
This Article discusses the FAQs clarified by the CBIC:
CBIC has clarified that in this context, the National Pharmaceutical Pricing Authority (NPPA) vide Office Memorandum (OMs) dated 12.9.2025 and 13.9.2025 has clarified that:
● All manufacturers/ marketing companies selling drugs/ formulations shall revise the Maximum Retail Price (MRP) of drugs/formulations (including medical devices).
● The manufacturers or marketing companies shall issue the revised price list or supplementary price list, in Form V/VI, to dealers and retailers for display to consumers, and to State Drug Controllers and the Government, reflecting the revised GST rates and revised MRP.
● However, recalling the stock or re-labelling, or re-stickering on the label of the container or pack of stocks released in the market before 22nd September, 2025, is not mandatory if manufacturer/ marketing companies can ensure price compliance at the retailer level.
● The office memorandums can be accessed here.
● For supply of bricks (other than sand lime bricks), A Special Composition Scheme was implemented w.e.f 1st April,2022.
● As per the scheme, bricks attract GST of 6% without ITC and 12% with ITC, with a threshold limit for bricks at Rs. 20 lakhs instead of Rs 40 lakhs as applies to goods.
● The GST council in its 56th meeting held on 3rd September, 2025, did not recommend any change in GST rates under the special composition scheme.
● However, GST on sand lime bricks has been recommended to be reduced from 12% to 5%.
● Therefore, the following shall be the GST rate on the supply of bricks:
○ Sand Lime Bricks: 5%
○ Other Bricks: 6% without ITC and 12% with ITC, with a threshold limit of Rs. 20 lakhs.
● Services of individual health and life insurance business provided by insurers to the insured are included within the ambit of the exemption.
● However, an exemption is not available where the insured is a group.
●Therefore, insurance services provided to an individual or to an individual with his/her family then the same will be exempted.
● GST on Hotel accommodation service, where the value of a unit of accommodation is less than or equal to Rs 7500/- per unit per day, shall be charged at the rate of 5% without ITC.
● It is a mandatory rate prescribed for such services, and the option to pay GST at the rate of 18% with ITC is not available for such units.
●Therefore, GST on such service is to be charged at 5% without any ITC.
The GST rate on beauty and physical well-being services is prescribed at 5% without ITC. Service providers do not have the option to charge GST at the rate of 18% with ITC.
In such cases,
● ITC about goods or services used exclusively in supplying such services shall not be taken by the service provider; and
● ITC with respect to commonly used goods or services, i.e., used partly for supplying services chargeable at 5% without ITC and partly for supplying other taxable supplies, shall be reversed by the service provider as if the supply leviable to 5% without ITC is exempt.
●Therefore, the service provider is required to reverse proportionate ITC as per Section 17(2) of the CGST Act, 2017, and the rules made thereunder.
● Job work services in relation to bus body building are taxable at 18% with ITC.
● Earlier, such services were covered under a specific entry [erstwhile Entry (ic) of Heading 9988] and attracted 18% with ITC.
●In the recent rate rationalization exercise, all residual job work services or other manufacturing services have been aligned to 18% with ITC, thereby subsuming the specific entry for bus body building.
● Job-work services in relation to those bricks that will attract GST @5% (E.g., sand lime bricks) will be taxable at the rate of 5% with ITC.
Multimodal transport of goods (where at least two different modes are used by a multimodal transporter) will be taxable as follows:
● 5% with restricted input tax credit — i.e., ITC allowed only on input services of transportation of goods, limited to 5% of the value; when no leg of transport of goods is by air.
● 18%, with full input tax credit; when at least one leg of the transport is by air.
● Input services of goods transportation limited to 5% of the value will be allowed even if the supplier of such services has charged a higher rate of tax. ITC will not be allowed for other inputs or input services.
● Example: ‘A’ engages ‘B’ (multimodal transporter) for transport of goods from New Delhi to Gaya for Rs. 1200, without involving any transportation through air. B’ hires GTA ‘C’ for Rs. 600, who charges tax @18% and Container Transport Operator ‘D’ for Rs. 400, who charges tax @5%.
● GST Rate applicable for the service provided by ‘B’: 5%
● ITC available to ‘B’:
○ GTA input: Rs. 30 (5% of Rs. 600), not Rs. 108 (18% of 600)
○ CTO input: Rs. 20 (5% of Rs. 400).
If at least one leg of transport is through air, the applicable GST rate will be 18%. In such cases entire ITC of inputs or input services is allowed.
Example: ‘A’ engages ‘B’ (multimodal transporter) for the transport of goods from New Delhi to Gaya for Rs. 1200, which involves transportation through air. B’ engages a service provider ‘C’, providing services of transport of goods through air for Rs 800 and a GTA ‘D’ for Rs. 200, who charges tax @18%.
GST rate applicable on the service provided by B: 18%
ITC available to ‘B’:
Services by way of local delivery provided through an e-commerce operator (ECO) where the person supplying such services is not liable to register under Section 22(1) shall be covered under Section 9(5) of the CGST Act.
Therefore, GST on such supply of service shall be discharged by the ECO.
● The local delivery services are chargeable at 18%.
● If such services of local delivery are supplied directly by a registered person: GST @ 18% payable by that person.
● However, If local delivery services are supplied through ECO by a person who is not liable to be registered, GST @ 18% shall be discharged by the ECO under section 9(5).
● If such services of local delivery are supplied through ECO by a registered person: GST@18% is payable by the supplier, not the ECO
“Goods Transport Agency” (GTA) will not include:
● “electronic commerce operator by whom the services of local delivery are provided,” and
●“electronic commerce operator through whom the services of local delivery are provided.”
● Generally, leasing or rental services without an operator are taxed at the same rate as applicable on the supply of like goods.
● GST Council has not recommended any change in this regard.
● The tax rate on such services will continue to be equal to the tax rate applicable to the supply of like goods.
● For example,
GST Rate on Cars or machines: 18%
GST Rate on leasing or renting (without operator) of such cars or machines: 18%
GST Rate on supply of any motor vehicle: 40% /50%
Leasing or renting services (without operator) will also be taxed at 40% or 5% respectively.
Supplier of services of leasing/renting a car with an operator (for example, driver) will now have the option of charging 5% with ITC of input services in the same line of business or 18% with full ITC.
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