CBIC Issues FAQs Clarifying GST Rate Changes and Exemptions: ITC Rules, Composition Schemes, and Service Rates Detailed [Read FAQs]

The Central Board of Indirect Taxes andCustoms (CBIC) issued a set of FAQs on 16 September 2025 to clarify GST rate changes and exemptions announced after the 56th GST Council Meeting (3 September 2025). The FAQs addresses practical questions across pharmaceuticals, drones, bricks, insurance, hospitality, transport, job work, and leasing.

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?

A1. No. Recalling or re-stickering of stocks released before 22 September 2025 is not mandatory. Manufacturers/marketing companies must issue revised price lists (Form V/VI) to dealers, retailers, and State Drug Controllers, ensuring price compliance at the retailer level.

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

A2. Yes. All types of drones will now attract a uniform GST rate of 5%.

Q3. What is the current GST rate on bricks?

A3. All kinds of bricks, except sand lime bricks, continue to attract 6% without ITC or 12% with ITC. The turnover threshold for registration is ₹20 lakhs. The rate on sand lime bricks has been reduced from 12% to 5%.

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

A4. Individual life and health insurance services provided by insurers to individuals or families are exempt from GST.

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

A5. Yes. Reinsurance services are exempt. Other input services like commissions and brokerage are not; ITC on them has to be reversed.

Q6. Do hotels which supply units of accommodation having value less than or equal to Rs 7500/- per unit day have the option of supplying such units at 18% with ITC?

A6. No. Such accommodation is taxed at 5% without ITC, and hotels cannot opt for 18% with ITC.

Q7. Will hotels supplying units of accommodation having value less than or equal to Rs 7500/- per unit per day be able to avail ITC in relation to such units?

A7. No. ITC is not available for such supplies.

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

A8. The 5% without ITC rate is mandatory. Service providers cannot opt for 18% with ITC.

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

A9. ITC on inputs used exclusively for such services cannot be taken. If inputs are used partly for such services and partly for taxable supplies, proportionate ITC reversal must be made as per Section 17(2) of the CGST Act.

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

A10. 18% with ITC.

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

A11. Job work services related to bricks attracting 5% GST (e.g., sand lime bricks) will be taxed at 5% with ITC.

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

A12.

• 5% with restricted ITC, if no leg of transport is by air.
• 18% with full ITC, if at least one leg 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%?

A13. Yes, but restricted. ITC on goods transport services is limited to 5% of the value. Other ITC is not allowed.

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

A14. GST at 18% applies, with full ITC allowed on all inputs and input services.

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

A15. If supplied through an ECO by an unregistered person, the ECO pays GST under Section 9(5).

Q16. At what rate are local delivery services taxable?

A16. 18%. If supplied directly by a registered supplier, that supplier pays. If supplied through ECO by an unregistered person, the ECO pays.

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

A17. ECOs providing local delivery services are not treated as GTAs.

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

A18. Taxed at the same rate as supply of like goods. For example, cars or machines at 18%, motor vehicles at 40% or 5%.

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

A19. Suppliers can choose:

• 5% with ITC restricted to input services in the same line of business, or
• 18% with full ITC.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates