The Government of India has made a major change in the rules of Goods and Services Tax (GST), which will be applicable from 1 April 2025. Under this change, Input Service Distributor (ISD) system has been made mandatory, which will ensure the correct distribution of tax revenue among the states. This change will be especially beneficial for businesses that work in more than one states.
With this change, GST rates will also be affected. The GST rate on the sale of old and electric cars has been increased from 12% to 18%. In addition, GST rates can also change when eating in hotels and restaurants. It is important to know what will affect the pockets of consumers with these changes.
GST new rules and their impact
Under the new GST rules, the use of ISD system will be mandatory. This system will allow businesses to centralize the invoice of common input services at its headquarters, which will allow the proper distribution of input tax credit (ITC) among all branches. This will reduce tax evasion and the GST system will be more systematic.
Details of GST rules
| Description | New rules |
| ISD system | Compulsory from 1 April 2025 |
| Common ITC distribution | Only through ISD mechanism |
| Tax revenue distribution | Ensure correct distribution among states |
| GST on Hotel and Restaurant | Rates can change |
| GST on old and electric cars | Increased from 12% to 18% |
| Multi-factor authentication (MFA) | Compulsory on GST portal |
| E-way bill rules | It is mandatory for businesses with more than ₹ 10 crore turnover to register invoice details within 30 days |
GST rates and their impact
GST rates are divided into four main slabs in India: 0%, 5%, 12%, 18%, and 28%. These rates are used on various goods and services. Recently the GST rate on the sale of old and electric cars has been increased to 18%, which can increase the prices of these vehicles.
Description of GST rates
- 0% GST: On essential items like grains, milk, fruits, vegetables etc.
- 5% GST: on cement, steel, some medicines etc.
- 12% GST: Penn, metal concentrates, some renewable energy equipment etc.
- 18% GST: Most services, packing containers, broadcasting services etc.
- 28% GST: Luxury items like cars, TV, air conditioner etc.
GST rules impact on businesses
This change of GST rules will have many benefits to businesses. Through the ISD system, businesses will be able to distribute their input tax credit correctly, which can reduce their tax liability. In addition, the implementation of multi-factor authentication (MFA) will increase security on the GST portal, which will reduce the chances of data theft and forgery.
Benefits for businesses
- Correct ITC distribution: Through ISD system, businesses will help in distributing their input tax credit correctly.
- Tax liability low: The correct ITC distribution may reduce the tax liability of businesses.
- Safe GST portal: The implementation of MFA will increase security on the GST portal.
- Transparency: Transparency in GST system will increase, which will reduce the chances of tax evasion.
Impact on consumers
This change of GST rules will also affect consumers. Increased GST rate on the sale of old and electric cars can increase the prices of these vehicles. In addition, GST rates can also change when eating in hotels and restaurants, which can increase the prices of food.
Effects for consumers
- Car prices will increase: Increased GST rate on old and electric cars can increase the prices of these vehicles.
- Inflation in hotels and restaurants: Changing GST rates by eating in hotels and restaurants can increase food prices.
- Impact on services: Changing GST rates on various services can also affect their prices.
conclusion
Changes in GST rules will affect both businesses and consumers. Through the ISD system, businesses will help in distributing their input tax credit correctly, which can reduce their tax liability. Apart from this, changes in GST rates will also affect the pockets of consumers. These changes will make the GST system more systematic and transparent.
Disclaimer: This article is for general information and should not be taken as any special financial advice. Changes in GST rules are real and will be applicable from 1 April 2025.
