The GST Council’s reforms, announced on September 3, 2025, have brought major changes in tax rates, directly impacting pricing, procurement, billing, and compliance for businesses. For business owners, switching between multiple guides to understand these changes can be overwhelming. This blog post acts as a step-by-step guide, summarizing the GST rate changes, industries impacted, a practical checklist to stay compliant, and simple steps to implement the reforms seamlessly with ERP software.
Table of contents
- Businesses impacted by GST reforms
- Changes in GST slabs: Then vs Now
- Checklist for next actions to take
- Steps to implement GST reforms in your software
- Why to have a single solution for billing and accounting
- Why Gofrugal is the best choice for GST-owned businesses
- Frequently asked questions (FAQ)
Which businesses are impacted?
The recent GST reforms will impact several business sectors. Below are the common classifications of business sectors that are impacted:
- Grocery and supermarkets
- Food and beverage
- Textile and manufacturing
- Electronics
- Gift and stationery shop
- Healthcare and insurance
- Mining and construction
- Paper and chemical industry
- Farming and equipment
- Automobiles
- Hospitality and services
- Tobacco and luxury goods
Changes in GST slabs: Then vs. now
Previously, there was a four-tier tax rate structure: 5%, 12%, 18%, and 28%. The new GST system, taking effect 22 September, will have a simplified two-tier tax rate structure: 5% and 18%. Therefore, items previously in 12% and 18% GST will now move into 5% GST and items in 28% GST will now have 18% GST. The 5% GST is called "Merit rate" and 18% GST is called "Standard rate."
Apart from the two rates of 5% and 18%, the new GST system will also include a 40% tax on sin goods that include multiple forms of tobacco and luxury items such as large cars, yachts, and helicopters which is commonly called the "de-merit rate" structure.
Below is the table containing existing and revised GST tax percents of commonly used items and services.
Goods/Service | Existing GST | Revised GST |
Hair oil, shampoo, dental floss, toothpaste, talcum powder, face powder, shaving cream, shaving lotion, aftershave lotion, toilet soap, toothbrushes | 18% | 5% |
Cheese, butter, and other fats (i.e. ghee, butter oil, etc.) and oils derived from milk; dairy spreads; beverages containing milk | 12% | 5% |
Ultra-high temperature (UHT) milk; prepackaged and labeled chena or paneer; pizza bread, khakhra, chapathi, roti | 5% | 0% |
Paratha, paroota, and other Indian breads, pastry, cakes, biscuits, and other bakers’ wares, whether or not containing cocoa; communion wafers | 18% | 0% |
Namkeens, bhujia, mixture, sauces, pasta, instant noodles, chocolates, coffee, preserved meat, cornflakes | 12% | 5% |
Jams, fruit jellies, marmalades, fruit or nut purée or pastes obtained by cooking, whether or not containing added sugar or other sweetening matter | 12% | 5% |
Tender coconut water, prepackaged and labeled; soya milk drinks; diabetic foods | 12% | 5% |
Drinking water packed in 20 liter bottles | 12% | 5% |
Plant-based milk drinks, ready for direct consumption as beverages | 18% | 5% |
Non-alcoholic beverages | 18% | 40% |
Carbonated beverages of fruit drink or carbonated beverages with fruit juice, caffeinated beverages | 28% | 40% |
Dates, figs, pineapples, avocados, guavas, mangoes (other than mangoes sliced, dried) and mangosteens, citrus fruit, starches, and insulin | 12% | 5% |
Vegetables, fruit, nuts, and other edible parts of plants, prepared or preserved by vinegar or acetic acid | 12% | 5% |
Man-made fiber | 18% | 5% |
Man-made yarn | 12% | 5% |
Footwear of sale value not exceeding Rs. 2,500 per pair | 12% | 5% |
Footwear of sale value exceeding Rs. 2,500 per pair | 18% | 18% |
Air-conditioning machines, TVs ~32 inch (all TVs now at 18%), dishwashing machines | 28% | 18% |
Erasers | 5% | 0% |
Pencils; pencil sharpeners; maps and hydrographics or similar charts of all kinds, including atlases, wall maps, topographical plans and globes; printed exercise books, graph books, laboratory note books, and notebooks; mathematical boxes; geometry boxes; and color boxes | 12% | 0% |
Sports gloves; toys like tricycles, scooters, pedal cars etc. (other than electronic toys); playing cards; chess boards; carrom boards; other board games; fishing rods | 12% | 5% |
Tooth powder, feeding bottles, all goods-safety matches, candles, feeding bottle nipples, handbags and shopping bags made of cotton and jute, sewing needles, combs, hair-slides and the like, hairpins, curling pins, curling grips, and hair-curlers | 12% | 5% |
Tableware; kitchenware; aluminum art ware; glass art ware; stone art ware; art ware of cork; art ware of iron, brass, copper/copper alloys, electro plated with nickel/silver; ornamental framed mirrors | 12% | 5% |
Furniture of bamboo, rattan and cane; dolls or other toys made of wood or metal or textile material [including wooden toys of sawantwadi, Channapatna toys, and Thanjavur doll); original sculptures and statuary in metal, stone, or any material; hand paintings drawings and pastels (including Mysore paintings, Rajasthan paintings, Tanjore paintings, palm leaf paintings, basoli etc.) | 12% | 5% |
Labor-intensive goods such as handicrafts, engravings, statues, prints, lithographs, handcrafted candles, handbags, marble and travertine blocks, granite blocks, intermediate leather goods, silicon wafers, plastic beads, latex rubber thread, rubber bands, contact lenses, spectacle lenses, coir products except coir mattresses, slide fasteners | 12% | 5% |
Sand lime bricks or stone inlay work | 12% | 5% |
Portland cement, aluminous cement, slag cement, super sulfate cement and similar hydraulic cements, whether or not colored or in the form of clinkers | 28% | 18% |
Sulfuric acid, nitric acid, and ammonia | 18% | 5% |
Mechanical wood pulp, paper pulp molded trays, paper sack and bio-degradable bags, ashpaltic roofing sheets, etc. | 12% | 5% |
Chemical wood pulp, grease-proof papers, glassline papers, composite paper and paperboard, paper and paperboard | 12% | 18% |
Agricultural goods such as tractors, agricultural, horticultural, or forestry machinery for soil preparation or cultivation; harvesting or threshing machinery including straw or fodder balers, grass or hay mowers, & composting machines | 12% | 5% |
Individual life insurance, ULIP, endowment policy, reinsurance | 18% | 0% |
Individual health insurance and reinsurance | 18% | 0% |
33 lifesaving drugs and medicines | 12% | 0% |
3 lifesaving drugs & medicines used for treatment of cancer, rare diseases, and other severe chronic diseases | 5% | 0% |
Medical apparatus and devices used for medical, surgical, dental, or veterinary usage or for physical or chemical analysis | 18% | 5% |
Medical equipment and supplies devices such as wadding gauze, bandages, diagnostic kits, and reagents; blood glucose monitoring system (Glucometer) medical devices | 12% | 5% |
Diabetic foods | 12% | 5% |
Small cars, motorcycles equal to or less than 350 CC | 28% | 18% |
Buses, trucks, and ambulances | 28% | 18% |
All auto parts irrespective of their HS code | Varying | 18% |
Three-wheelers | 28% | 18% |
Motor cycles of engine capacity exceeding 350 cc, aircraft for personal use, yachts, and other vessels for pleasure or sports | 28% | 40% |
Renewable energy devices and parts for their manufacture | 12% | 5% |
Hotel accommodation services having value less than or equal to Rs. 7,500 per unit per day or equivalent | 12% | 5% |
Beauty and physical well-being services used by common man including services of gyms, salons, barbers, yoga centers, etc. | 18% | 5% |
Two-way radio (walkie-talkie) used by defense, police and paramilitary forces; tanks and other armored fighting vehicles, motorized, whether or not fitted with weapons, and parts of such vehicles | 12% | 5% |
Source: Press release by GST council
Checklist for next actions to take
With the revised GST rates coming into effect, businesses must act quickly to ensure billing accuracy, compliance, and smooth day-to-day operations. Here’s a practical checklist you can follow to make the migration to the new GST slabs seamless:
- Categorize SKUs based on the revised GST slab and note down their inventory across all outlets.
- Compare old versus new GST rates and update masters in your ERP such as the item master and tax master to ensure revised GST rates reflect in future transactions.
- Review MRP and selling prices and correct them to ensure profitability is maintained despite tax changes.
- Track purchase orders in transit and approval stages, verify the GST applied, and review things to see if revisions are needed.
- Check payments pending and in progress, and review them to see if any adjustments need to be done.
- Verify accounting entries to ensure revised GST rates reflect in ledgers and reports.
- Ensure GST rates are correctly displayed on invoices, receipts, and bills given to customers.
How to implement GST reforms in your software
To stay compliant with the revised GST rates, businesses must update their software without delay. In sectors like retail and restaurants, even small errors in tax setup can cause billing issues, customer dissatisfaction, and compliance risks. Updating your ERP or POS ensures every bill, purchase order, and accounting entry reflects the new GST structure. Here are key actions to take in your software for a smooth transition.
- Update the tax master with current GST rates and add the new GST rate (40%), if applicable for your business.
- Update the GST rates in bulk for applicable items in the masters or correct them individually for special cases.
- If you have configured GST rates based on price slab (especially for apparel and shoe businesses), review the price slab and add revised the GST percent in the software to ensure the GST rate is automatically applied based on bill value.
- Ensure GST rates of combo and kit items, discount, and offer-applicable items are configured correctly and make corrections as needed.
- Check the bill print design and ensure if the font, alignment, and spacing are correct after updating the GST rates of items.
Why should you have a single solution for billing and accounting?
- Transparency: An integrated ERP provides end-to-end visibility from billing to accounting, ensuring data consistency across departments and reducing the risk of misappropriation.
- Productivity: A unified POS system eliminates repetitive manual work, minimizes errors like typos and mismatched uploads, increases data accuracy, and allows your staff to focus on other key tasks.
- Compliance: With precise, real-time data flowing into accounting, businesses can maintain tax, statutory, and financial compliance effortlessly, reducing the risk of penalties.
Why Gofrugal is the best choice for GST-owned businesses
Gofrugal omnichannel ERP for retail, restaurant, and distribution businesses handles all operations from billing to filing in a single software, assuring increased accuracy, productivity, and scalability to multiple outlets. Below are some of the features that allow you to stay compliant with GST changes.
- Tax automation: The GST rates of sales and purchase transactions are posted immediately in accounting ledgers without any manual intervention. You can also save time in tax filing with a simple configuration for automatic tax filing.
- Automated GST reports: You can view various GST-related reports such as GSTR-1, GSTR-3B, and reconciliation reports for your business and make informed decisions.
- Automated e-invoicing and e-way bills: Gofrugal ERP software automatically generates e-invoices with IRN and QR codes, and e-way bills with relevant dispatch details, reducing time and labor significantly.
Staying compliant with GST rate changes is no longer just about avoiding penalties; it’s about running your business smoothly, winning customer trust, and staying competitive. For retailers and restaurants, every bill, every menu update, and every return filing matters. By adopting the right ERP software like Gofrugal, you can ensure compliance, automate GST updates, and focus more on growing your business instead of worrying about tax rules. Embrace the reforms with confidence because, with the right tools, compliance becomes effortless, accurate, and future-ready.
Frequently Asked Questions (FAQ)
What are the new GST rate slabs in 2025?
The new GST reforms will simplify the tax structure into a two-tier tax system. The new GST rate slabs will have only 5% and 18%. A fresh GST slab rate of 40% is introduced which will be applicable for sin goods and luxury goods.
How do GST slab changes impact retailers?
The GST slab changes simplify taxation, increase buying capacity of consumers, and boost sales. The retailers should also take some immediate action to move out the existing inventory bought with old GST rates and make corrections in the software for smoother billing. But since the GST rate reforms are expected to reduce the price of items and increase sales, it is beneficial for retailers.
Which restaurant services are affected by the new GST slabs?
Since the new GST slabs impact the cost of raw materials used in the restaurant industry, it is expected to affect many restaurant services. Dine-in, takeaway, cloud kitchens, online food delivery, outdoor catering, bakeries, all restaurants selling beverages and packed foods, and restaurants with hotel rooms are affected by the new GST slabs since the GST rates of goods and services provided by them are revised in the recent GST reforms.
What should businesses do immediately after GST rate changes?
Businesses should take the following steps after GST rate changes.
- Update master data: Make corrections in the tax master, item master, and tax slab master to ensure correct tax is reflected during future billing.
- Correct the MRP and price: Review and update the MRP and selling price of items such that the landing cost remains the same without affecting the margins.
- Verify bills and invoices: Check the GST rates in sales bills and purchase bills if the revised GST rates are applied correctly.
- Adjust accounting: Make changes in the accounting module to ensure accounting entries reflect the revised GST rates.
- Communicate suppliers: Inform suppliers to provide invoices with revised GST percents to ensure the input tax credit aligns with the GST rate changes.
- Flush out inventory: Move the stock bought in existing GST rates quickly by selling them in combos, offers, and discounts.
How can ERP software help with GST compliance?
- Automatic GST rate updates: GST rates for items can be configured in the software which will be loaded automatically during billing without manual work.
- GST compliant invoicing: You can generate invoices with correct GST breakup (CGST, SGST, IGST) based on the delivery location automatically.
- Easy filing of GST returns:ERP software with integrated accounting shows real-time data of GSTR-1 and GSTR-3B and allows you to file GST returns smoothly with direct integration to the GST portal.
- Input tax credit (ITC) management: ERP software allows you to track GST paid on purchases, matching it with sales, and helping businesses maximize input tax credit claims.
- Reduced manual errors: Using an ERP software minimizes errors in tax calculation and returns filing.
- Audit and compliance readiness: All the bills, invoices, returns, and credit/debit notes are stored safely in the software and can be accessed anytime easily during audit checks.
Do I need to manually update GST rates in my billing system?
No, you don't need to manually update the GST rates in the billing system. Instead, you can make corrections in the master data such as the tax master and item master such that all the future sales and purchase transactions reflect the revised GST rates.
What happens if I don’t update GST slabs in my system?
- Wrong tax calculation: Incorrect tax will be applied on the bills, leading to disputes, refunds, and poor customer experiences.
- Penalties for non-compliance: Since you are not passing the benefit of revised GST rates to the customers, it will lead to penalties and notice from GST authorities.
- Interest for short payments: If the GST rates have increased and you're not collecting the extra amount from customers, it is considered short payment of tax, for which interest will be charged at 18% per annum from the due date.
- Inaccurate GST returns: Not updating GST slabs will cause GSTR-1 and GSTR-3B data to be mismatched with the supplier data and can result in mismatch during reconciliation.
- Input tax credit mismatch: If purchase and sales invoices don't reflect the correct GST rates, ITC claims will get rejected.
- Inaccurate invoicing: If you don't update the GST slabs, it impacts the supplier who filed returns with revised GST rates correctly and ITC might be rejected for them too resulting in poor supplier relationships.
Why should I choose Gofrugal ERP for GST compliance?
Gofrugal is GST-integrated omnichannel ERP software that allows you to manage not only billing and inventory but handle all the accounting needs such as GST filing, e-invoicing, IRN generation, view real-time GSTR reports, and file returns from a single software. Below are a few reasons why you should choose Gofrugal ERP for GST compliance.
GST integrated accounting: You can create ledgers and vouchers for your business transactions, maintain records for each transaction with separate journal entries, and ensure automated GST posting in accounting ledgers.
Centralized accounting: You can monitor real-time GST liability across multiple outlets, update GST rates, and file GST returns from a centralized location.
Flexible tax filing: Enjoy the flexibility to either verify, validate, and file the GST returns manually or make automated tax filing by enabling the configuration.
Automated GST reports: Gofrugal software generates automated GSTR-1, GSTR-3B, and reconciliation reports, thus accelerating decision-making.
Automated invoicing and e-way bills: Gofrugal ERP software automatically generates e-invoices with IRN and QR codes and e-way bills with relevant dispatch details, reducing time and labor significantly.
Always stay compliant: Gofrugal implements all the GST amendments and reforms in the software immediately, ensuring you stay tax and statutory compliant.
