(Issued by CBIC pursuant to the 56th GST Council Meeting – 03.09.2025)
The CBIC has issued a second set of FAQs (19 queries) clarifying industry concerns on GST rate rationalisation. Below is a structured analysis:
1. Medicines & Medical Devices (Q1)
- Position: No recall/re-labelling needed for stocks released before 22.09.2025.
- Requirement: Manufacturers must issue revised price lists (Form V/VI) to dealers, retailers, and State Drug Controllers.
- Implication:
- Practical relief to pharma companies – avoids wastage of already printed stock.
- Compliance shifts to ensuring retailer-level price control.
- Similar to past NPPA interventions during rate changes.
2. Drones (Unmanned Aircrafts) (Q2)
- Position: Uniform 5% GST for all drones (previously 28% for personal use, 18% for drones with cameras, 5% for others).
- Implication:
- Major boost to drone industry (especially agriculture, logistics, mapping).
- Reduces classification disputes that plagued the sector.
3. Bricks (Q3 & Q11)
- Position:
- Regular bricks: 6% (without ITC) / 12% (with ITC), threshold ₹20 lakhs.
- Sand lime bricks: reduced from 12% to 5%.
- Job work on bricks taxable at 5% (if underlying bricks taxed @5%).
- Implication:
- Rate rationalisation supports low-cost housing sector.
- Clear distinction between sand-lime and other bricks helps avoid confusion.
4. Insurance Sector (Q4 & Q5)
- Position:
- Exemption for individual health & life insurance.
- Reinsurance services also exempt.
- Other input services (commission, brokerage, etc.) – ITC reversal required.
- Implication:
- Relief for policyholders (reduction in cost).
- Compliance challenge for insurers due to ITC reversals.
- Possible increase in embedded cost of operations for insurers.
5. Hotels & Accommodation (Q6 & Q7)
- Position:
- Rooms ≤ ₹7,500/day → mandatory 5% without ITC.
- No option for 18% with ITC.
- Implication:
- Budget/mid-segment hotels lose ITC advantage.
- Industry push for optional ITC not accepted.
- Likely impact on business travellers (as ITC blocked).
6. Beauty & Well-being Services (Q8 & Q9)
- Position:
- Mandatory 5% without ITC.
- ITC reversal required for common inputs (treated as exempt supply under Sec 17(2)).
- Implication:
- End-consumer prices may remain high since ITC not available.
- Service providers will face cost pressures.
7. Job Work Services (Q10 & Q11)
- Position:
- Bus body building – 18% with ITC.
- Bricks @5% – job work also 5% with ITC.
- Implication:
- Bus manufacturing remains neutral (ITC allowed).
- Bricks job work aligned with underlying tax rate – avoids disputes.
8. Multimodal Transport (Q12–Q14)
- Position:
- Without air leg → 5% with restricted ITC (up to 5% of value).
- With air leg → 18% with full ITC.
- Implication:
- Creates dual structure based on mode of transport.
- May lead to classification challenges for logistics players.
- ITC restriction increases compliance burden for multimodal operators.
9. Local Delivery Services via ECOs (Q15–Q17)
- Position:
- Covered under Sec 9(5) if provided via ECO by unregistered suppliers.
- Always taxable @18%.
- ECO not considered GTA.
- Implication:
- Brings gig-economy “last-mile delivery” squarely under GST net.
- Increases liability for e-commerce platforms (Swiggy, Zomato, Dunzo, Amazon, etc.).
- Clear demarcation from GTA avoids overlap disputes.
10. Leasing / Renting Services (Q18–Q19)
- Position:
- Without operator → same GST rate as goods leased.
- With operator → option of 5% (with limited ITC on similar services) or 18% (with full ITC).
- Implication:
- Flexibility offered to fleet operators.
- Businesses may prefer 18% with full ITC for corporate clients.
- Alignment with global practices where operating leases mirror supply of service.
Frequently Asked Questions- 2
http://mohansekhar.in/wp-content/uploads/FAQ_2_on_GST_Rate_Rationalization.pdf