New Delhi, Sep 16
The Finance Ministry on Tuesday issued a list of frequently asked questions (FAQs) to provide a more detailed explanation on the tax rate cuts that have been announced as part of the GST 2.0 reforms.

Q1. Is it required to recall and re-label MRP on medicines already in the supply chain before 22nd September, 2025? How will the re-labelling be implemented?

Answer: The National Pharmaceutical Pricing Authority (NPPA) vide OMs dated 12.9.2025 and13.9.2025 have clarified the following:

- All manufacturers/ marketing companies selling drugs/ formulations shall revise the Maximum Retail Price (MRP) of drugs/formulations (including medical devices).

- The manufacturers/ marketing companies shall issue 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.

-Recalling, re-labelling, or re-sticking on the label of container or pack of stocks released in the market prior to 22nd September, 2025 is not mandatory, if manufacturer/ marketing companies are able to ensure price compliance at the retailer level.

Q2. Unmanned aircrafts (Drones) attracted 5 per cent, 18 per cent and 28 per cent GST rate. The 56th GST Council had recommended a 5 per cent GST rate on drones. Whether this 5 per cent GST rate will apply to all types of drones?

Answer: Yes. The GST Council has recommended a uniform GST rate of 5 per cent on all drones.

Q3. What is the current GST rate on bricks?

Answer: The GST council did not recommend any change on the special composition scheme rates except on sand lime bricks on which GST rate has been recommended to be reduced from 12 per cent to 5 per cent. Hence, all kinds of bricks except sand lime bricks continue to attract GST of 6 per cent without ITC and 12 per cent with ITC with a threshold limit of Rs. 20 lakh.

Q4. What are the insurance services covered within the ambit of the exemption granted to individual life and health insurance?

Answer: Services of individual health and life insurance business provided by insurers to the insured, where the insured is not a group, are included within the ambit of the exemption. When these services are provided to an individual, or to an individual with his/her family, the same will be exempted.

Q5. In addition to exempting services of individual health and life insurance supplied by insurers, will any input services of insurers be also exempted?

Answer: At present, insurers are availing ITC on many inputs and input services such as commissions, brokerage and reinsurance, etc. Out of these input services, reinsurance services will be exempted. Input Tax Credit of other inputs or input services is to be reversed because the output services will be exempted.

Q6. Do hotels which supply units of accommodation having value less than or equal to Rs 7,500 per unit day have the option of supplying such units at 18 per cent with ITC?

Answer: Suppliers of hotel accommodation service where the value of a unit of accommodation is less than or equal to Rs 7,500 per unit per day, shall have to charge GST at 5 per cent without ITC on such units. It is a mandatory rate prescribed for such services, and the option to pay GST at the rate of 18 per cent with ITC is not available for such units.

Q7. Will hotels supplying units of accommodation having value less than or equal to Rs 7,500 per unit per day be able to avail ITC in relation to such units?

Answer: The hotels supplying units of accommodation which have value less than or equal to Rs 7,500 per unit per day, shall not be able to avail ITC on such units, as the GST rate prescribed for such supplies is 5 per cent without ITC.

Q8. Is the 5 per cent without ITC rate on beauty and physical well-being services mandatory? Can service providers charge 18 per cent with ITC?

Answer: The 5 per cent without ITC rate on beauty and physical well-being services is mandatory. Service providers do not have the option to charge 18 per cent with ITC on these services.

Q9.How should a service provider deal with input tax credit (ITC) in cases where GST is payable at a rate of 5 per cent without ITC?

Answer: In such cases,

(a) Credit of input tax charged on goods or services used exclusively in supplying such services shall not be taken by the service provider; and

(b) Credit of input tax charged on goods or services used partly for supplying such services and partly for supplying other taxable supplies shall be reversed by the service provider as if the supply leviable to 5% without ITC is an exempt supply. Consequently, proportionate ITC shall be required to be reversed by the service provider as per Section17(2) of the CGST Act, 2017 and the rules made thereunder.

Q10. What is the GST rate applicable on job work services in relation to bus body building?

Answer: Job work services in relation to bus body building are taxable at a GST rate of 18 per cent with Input Tax Credit (ITC). In the recent rate rationalization exercise, all residual job work services or other manufacturing services have been aligned to 18 per cent with ITC, thereby subsuming the specific entry for bus body building.

Q11. What is the GST rate applicable on job work services in relation to bricks?

Answer: Job-work services in relation to those bricks that will attract GST at 5 per cent (e.g. sandlime bricks) will be taxable at the rate of 5 per cent with ITC.

Q12. What is the GST rate applicable on multimodal transport of goods?

Answer: Multimodal transport of goods (where at least two different modes are used by a multimodal transporter) will be taxable as follows:

(a) 5 per cent with restricted input tax credit — i.e. ITC allowed only on input services of transportation of goods limited to 5 per cent of the value; when no leg of transport of goods is by air. (b) 18 per cent, with full input tax credit; when at least one leg of the transport is by air.

Q13. Can ITC be taken on multimodal transport services, where no leg of transport is by air and the applicable rate is 5 per cent?

Answer. Input services of goods transportation limited to 5 per cent 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.

Q14. What is the tax treatment if multimodal transportation involves transport of goods through air also?

Answer: If at least one leg of transport is through air, the applicable GST rate will be 18 per cent. In such cases entire ITC of inputs or input services is allowed.

Q15. Who is liable to pay GST for Local Delivery Services provided through ECO?

Answer: 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) will be covered under Section 9(5) of the CGST Act. In such cases, the liability to pay GST will be on the ECO.

Q16. At what rate are local delivery services taxable?

Answer: The services of local delivery are taxable at 18 per cent.

Q17. Whether an ECO providing the local delivery services is covered within the scope of GTA? What will be the effect if the local delivery services are provided through an ECO?

Answer: “Goods Transport Agency” (GTA) will not include:

(a) “electronic commerce operator by whom the services of local delivery are provided,” and (b) “electronic commerce operator through whom the services of local delivery are provided.”

Q18. What is tax treatment for leasing or renting services without operator?

Answer: Majority of leasing or rental services without operator are taxed at the same rate as applicable on supply of like goods. No change is proposed in this regard. The tax rate on such services will continue to be equal to the tax rate applicable on supply of like goods. For example, if cars or machines are taxed at 18 per cent then the rate of 18 per cent will be applicable for leasing or renting (without operator) of such cars or machines. Similarly, if supply of any motor vehicle is taxed at 40 per cent or 5 per cent then the leasing or renting services (without operator) will also be taxed at 40 per cent or 5 per cent, respectively.

Q19. What is the applicable tax rate on leasing/renting a car with an operator?

Answer: Supplier of services of leasing/renting a car with operator (for example, driver) will now have the option of charging 5 per cent with ITC of input services in the same line of business or 18 per cent with full ITC.

All you need to know about the new tax rates in GST 2.0 era