GST New Rates & ITC Transition — Effective 22 Sept 2025
This page summarises how the new GST rates interact with invoice and payment dates, and the resulting treatment of Input Tax Credit (ITC).
Key focus: ITC reversal for stock
Quick Overview
When GST rates change, the applicable rate and ITC treatment depend on three dates: time of supply (when goods/services were supplied), invoice issue date, and payment date. Where outward supplies move to a NIL-rated category, reversal of ITC for stock held on the transition date (22 Sept 2025) may be required under Section 17(2) and Rule 42.
Transition Scenarios (Explained in Paragraphs)
1. Supply Before 22nd September 2025, Invoice & Payment on/after 22nd September: The new GST rate will apply. Input Tax Credit (ITC) is available but may need to be reversed for stock lying on 22nd September if the outward supply has become NIL-rated under Section 17(2) and Rule 42.
2. Supply Before 22nd September 2025, Invoice & Payment before 22nd September: The old GST rate will continue to apply. ITC will be available as per the existing rules if eligible.
3. Supply Before 22nd September 2025, Invoice before 22nd September but Payment on/after 22nd September: The old rate applies. ITC remains available as per earlier provisions, if eligible.
4. Supply On/after 22nd September 2025, Invoice & Payment before 22nd September: Even though supply is after the date, since invoice and payment are both before 22nd September, the old rate applies. ITC will be available as per old rules.
5. Supply On/after 22nd September 2025, Invoice on/after 22nd September but Payment before 22nd September: The new GST rate will apply. ITC is allowed, but subject to reversal for stock lying on 22nd September if the supply becomes NIL-rated.
6. Supply On/after 22nd September 2025, Invoice & Payment before 22nd September: The new rate will apply. ITC is subject to reversal where outward supply has become NIL-rated as on 22nd September.
Action Points for Businesses
- Review stock on hand as of 22 Sept 2025 and identify items that may become NIL-rated.
- Reconcile invoices and payment dates to correctly determine applicable rates.
- Prepare ITC reversal calculations under Sec.17(2) and Rule 42, where required.
- Maintain proper documentation: invoices, payment receipts and stock registers for audit trail.
Disclaimer
This content is for general information on GST changes effective 22nd Sept 2025. It does not constitute professional advice. Please consult your tax advisor or GST consultant before making business or compliance decisions.