Latest GST Rule Changes for FY 2025–26: A Complete Guide

In India, the government has introduced various key GST rule changes for FY 2025–26 to facilitate compliance, improve transparency, and boost ease of doing businesses. These updates focus on creating tax filing smoother for businesses, improving digital verification, and strengthening the prevention of fraud. So, every small business owner or registered taxpayer must know the new GST rules to stay compliant and avoid penalties. In this piece of writing, you will get to know about the GST Rule Changes for FY 2025–26.

Overview of GST in India

Goods and Services Tax (GST) is defined as a value-added, comprehensive, multi-stage, and destination-based indirect tax system. This system was implemented on July 1, 2017 and applies to goods and services at every stage. It has replaced multiple indirect taxes, including VAT, service tax, and excise duty, which creates a simple and unified system. Businesses receive credit for their tax, and the final customer pays the total tax under GST. CGST (Central Goods and Services Tax) goes to the Centre, and State Goods and Services Tax (SGST) goes to the state. On the other hand, IGST is applied to inter-state sales. Thus, GST helps to simplify taxation, prevent double taxation, and promote a common market across India.

What Are the Key GST Rule Changes for FY 2025–26?

Listed below are the key GST rule changes for FY 2025-26:

1. Mandatory Multi-Factor Authentication (MFA)

The National Informatics Centre (NIC) has introduced two-factor authentication (2FA) or multi-factor authentication (MFA) to access the GST portals. It is useful for logging to the e-way bill or e-invoice systems. In this security step, users use two or more verification methods to confirm their identity. This helps to make logins more secure and protect the accounts of taxpayers from unauthorised access and fraud.

Implementation Timeline:

• January 1, 2025: 2FA becomes compulsory for taxpayers with an annual aggregate turnover (AATO) is above Rs. 20 crores.
• February 1, 2025: This requirement extends to taxpayers with an annual aggregate turnover is more than Rs. 5 crores
• April 1, 2025: It is suitable for all taxpayers, which is regardless of turnover. It helps to ensure secure e-way bill access.

2. Compulsory Input Service Distributor (ISD) Registration

Businesses with multiple GST registrations under the same PAN had two options to share common expenses. They can use the Input Service Distributor (ISD) mechanism or choose a cross-charge approach to share common input services. The services can include rent, software licenses, audit, and fees across various units. However, many businesses opt for cross-charge because it has operational simplicity. This method can bring complications in ITC distribution and tax reconciliation.

Moreover, it is effective from April 1, 2025, that businesses with multiple GST registrations need to use the ISD registration. They are required to issue ISD invoices and file GSTR-6 returns to share Input Tax Credit (ITC) across branches. This helps to make tax distribution more transparent, easier to track, and ensures consistent reporting across all units.

3. Amendments to GSTR-7 and GSTR-8 Formats

According to the Notification No. 09/2025–Central Tax, which is effective from February 11, 2025, the government has updated the GSTR-7 form, which means TDS. They have also introduced GSTR-8, which means TCS for e-commerce forms. The changes focus on building transparency, strengthening data validation mechanisms, and improving compliance accuracy for tax authorities.  

Here is a detailed overview of the Formats:

GSTR-7

The GSTR-7 format has been changed to portray tax deducted for each invoice or document. It requires additional details in the return that include the GSTIN of the deductee, the amount paid, the number of the invoice, and the tax deducted. It will help to make the reporting of tax deductions more accurate and transparent.

GSTR-8

GSTR-8 format has been amended to provide all necessary details of supplies made through e-commerce platforms. This change helps businesses to comply with tax rules and ensure accurate reporting.

4. Rules for Generating and Extending e-Way Bills

Here are the new rules for e-Way Bill generation and extensions to strengthen the tracking and security of goods movement:

• Generation Restriction: From January 1, 2025, e-Way Bills can only be created for documents from the past 180 days. For example, from April 1, 2025, any document dated before October 3, 2024, will not be allowed for generating an e-Way Bill. This means the bills are issued only for recent transactions to improve accuracy and reduce misuse.
• Extension Limitation: The facility to extend an e-Way Bill will be restricted to 360 days from the date of its generation. For example, the e-Way Bill generated on April 1, 2025, and can only be extended up to March 27, 2026. These measures help to make goods movement more transparent and eliminate fraudulent activities. This also ensures better compliance for businesses across India.

However, this approach balances operational flexibility while strengthening GST compliance.

5. 30-Day Reporting Rule for E-Invoices Expanded to More Taxpayers

The government has introduced stricter e-invoicing rules to ensure timely reporting and reduce tax evasion. From April 1, 2025, the 30-day deadline for reporting their e-invoices on the Invoice Registration Portal (IRP) will apply to firms with an annual aggregate turnover (AATO) exceeding Rs. 10 crore. Earlier, this was applicable to only those above Rs. 100 crore of turnover. It will improve compliance and smoothen the process of reporting of invoices for a larger number of taxpayers.

However, this implies that the concerned taxpayers having a turnover above Rs. 10 crore have to report all B2B invoices to IRP within 30 days of the invoice date. If the taxpayers fail to report invoices within 30 days, the invoice will get rejected for IRN generation. This can affect their ability to claim input tax credit, and may lead to delays in meeting other tax compliance requirements. Therefore, it is important to make timely reporting.

6. Compulsory Sequential Filing of GSTR-7 for TDS Deductors

From November 1, 2024, TDS deductors are falls under Section 51 of the CGST Act, 2017. They should file GSTR-7 returns in strict sequence. These new rules help to simplify TDS compliance for the deductor and enhance the reconciliation process. It also brings more clarity in the entire GST mechanism. However, it helps to promote transparency for both taxpayers and authorities.

Key changes can include:

• Sequential Filing Requirement: You will not be able to file current month's GSTR-7 if any previous returns, including Nil returns, have not been submitted. This ensures that all filings are complete and in sequence.
• Mandatory Nil Returns: Even if you do not deduct any tax for a period, you still have to file a Nil return. This keeps the continuity in your filing record and avoids any blockage in the system.
• Rationalised Late Fees: Late fees for GSTR-7 have been revised so that the penalty burden is reduced while encouraging timely compliance. In this way, it helps deductors stay updated without facing heavy fines.

Steps Taxpayers Need to Follow

As a taxpayer, you must carefully review your current GSTR-7 filing process to identify any missed returns and file all pending returns. Even if no tax was deducted, you still need to file a Nil return to keep your filings in order and avoid any issues on the GST portal.

7. Mandatory Biometric Verification for Company Directors

From March 4, 2025, all promoters and directors of private, public, and foreign companies in India will need to complete their biometric authentication at a GST Suvidha Kendra (GSK) in their respective home state. This new step will help make the process for GST registration smoother, while making the GST system more secure and reliable.

Key Highlights can include:

• Location Flexibility: Directors are not required to go to any GSKs in the jurisdiction of their company's principal place of business. They can perform the process at any GSK within their home state, making it far more convenient.
• Biometric Process: The authentication will include fingerprint scanning, facial recognition, capturing of a photograph on site and verifying physical documents to confirm identity.
• Who It Applies To: This is required for all new GST registrations of corporate entities that includes foreign companies operating in India.
• Implementation Date: This facility will be available across the country with effect from March 4, 2025. This was announced in the GSTN Advisory on April 3, 2025.

8. GST Rate Reforms for Hotels and Used Cars

In a major step which focuses on simplifying tax compliance and promoting transparent taxation, the government has introduced new GST rules for the hotel and used car sectors. This will come into effect from April 1, 2025. These changes focuses on bringing in more transparency, reducing confusion, and simplifying the way GST is calculated and paid.

A. GST Updates for the Hospitality Sector (Hotels)

It has been decided by the government to withdraw the 'Declared Tariff' system, which often created confusion during assessments. GST shall be levied at the actual amount paid by the customer for the room, without a pre-declared tariff.

If the room tariff is above Rs.7,500 per night, it will attract 18% GST. Such accommodation and related restaurant services in hotels can now claim full ITC.

Benefits for the industry:

• Simplified Process: Hotels are not required to maintain separate tariff declarations, which in return makes compliance simpler.
• Fairer Taxation: The GST will fall on the actual price received from the guests. It is transparent and fair.
• Better ITC Access: Hotels can now enjoy smoother cash flow and reduced tax burdens with full availability of Input Tax Credit (ITC).

B. GST Updates for Sale of Used Cars

• The government has provided a uniform 18% GST rate for the used car market. It will be charged only on the margin value. This value is the difference between the selling and purchase price. This rate is suitable for all categories of used cars, category, irrespective of the size of the engine, ground clearance, or whether small, luxury, electric, or fuel-based.
• No amount of GST is payable by a dealer if the car is sold at a loss in respect of which the margin is negative.

However, this change simplifies the tax structure for second-hand car dealers and ensures uniform taxation across all vehicle categories. This helps to make the system more transparent and easier to follow.

How has the GST rule change impacted businesses?

Here is the detailed overview of the impact of GST rule changes on Businesses:

• Simplified GST Rate Structure

The government has revised GST rate slabs with an aim to reduce confusion and improve efficiency. Most of the goods fall under the categories of the 5% and 18% tax slabs. On the other hand, the luxury and sin goods go to a higher tax rate of 40%. This change helps to lower tax costs for essential goods. It also makes pricing simpler for traders and manufacturers. Businesses in premium categories could see an increase in tax expenses.

• Reduced Compliance Burden

The whole process of GST registration gets completed within three working days if the documents are accurate. This change allows new firms to start their operations faster. It also helps to reduce delays that earlier affected business expansion and growth of startups.

• Digital Reforms and Transparency

The government imposes stronger e-invoicing rules and multi-factor verification for portal access. These measures help to improve data security and reduce fake invoicing. Most of the GST tasks move to automated digital systems which helps businesses to save time and effort.

• Stricter Input Tax Credit (ITC) Rules

Any company needs to ensure that the invoices and details of tax correspond to each other before making any claims for the ITC. This again would help in ensuring that there is no misuse and, thereby, assurance of better accuracy in taxation. The timely reconciliation further assists business houses in avoiding penalties and disputes.

• Faster Refund Process

The refund mechanism becomes speedy, especially for exporters and MSMEs, which keeps the cash flow intact and supports investment in day-to-day operations.

• Sector-Specific Advantages

Industries like textiles, footwear, handicrafts, and toys receive special relief under the “Next Generation GST” framework. Lower rates and simpler compliance support domestic manufacturing and job creation.

• Overall Business Benefits

The 2025 reforms to GST simplify the system of taxation, making it fairer and more transparent. Those who follow the new rules remain compliant, achieve cost savings, and enhance operational efficiency in all sectors.

• Digital Reforms and Transparency

The government introduces stronger e-invoicing rules and multi-factor verification for portal access. These steps improve data security and reduce fake invoicing. Businesses save time and effort as most GST tasks move to automated digital systems.

• Stricter Input Tax Credit (ITC) Rules

Companies must ensure all invoices and tax details match before claiming ITC. This step prevents misuse and improves tax accuracy. Timely reconciliation helps businesses avoid penalties and disputes.

• Faster Refund Process

The refund system becomes quicker, especially for exporters and MSMEs. This helps maintain smooth cash flow and supports investment in daily operations.

• Sector-Specific Advantages

Industries such as textiles, footwear, handicrafts, and toys receive special relief under the “Next Generation GST” framework. Lower rates and simpler compliance support domestic manufacturing and job creation.

• Overall Business Benefits

The 2025 GST reforms make the tax system simpler, fairer, and more transparent. Businesses that follow the new rules stay compliant, save costs, and improve operational efficiency across all sectors.

Conclusion

Therefore, the GST Rule Changes for FY 2025–26 focus on simplifying tax compliance, promoting transparency, and supporting business growth. These updates will help to make GST filing smoother and fairer for all, with clear guidelines related to hotels and the used car market. Businesses must stay informed and adapt early to enjoy seamless compliance and improved cash flow. Thus, if you understand these GST reforms, you will be able to stay compliant in the evolving tax landscape FY 2025–26.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.

FAQ

Q1. What are the major GST rule changes for FY 2025–26?

The GST rule changes for FY 2025–26 focus on simplifying tax filing, improving e-invoicing systems, and improves fraud detection. The new set of digital verification tools, better compliance timelines, updates regarding rules on ITC, and more have been introduced by the government for smooth business operations.

Q2. Why did the government introduce new GST rule changes in 2025–26?

The government has introduced new GST rule changes in 2025–26 to make the GST system more transparent, reduce tax evasion, and promote ease of doing business. The changes helps to align GST processes with India's evolving digital and economic landscape.

Q3. How do the 2025–26 GST rule changes affect small businesses?

The 2025-2026 GST rule changes simplifies return filing and helps small businesses reduce compliance costs.  Many GST Suvidha Kendras and online systems are upgraded to make registration, invoice generation, and tax payment easier and faster.

Q4. Are there any changes in GST return filing for FY 2025–26?

Yes, the government has improved the GST return filing process with more automation, better reconciliation features, and faster validation of invoices. It allows taxpayers to use enhanced digital tools to file accurate returns with minimal manual effort.

Q5. Where can I check official updates on GST rule changes for FY 2025–26?

You can check the official updates on the latest GST rule changes for FY 2025–26 on the official GST portal, Central Board of Indirect Taxes and Customs, or the GST Council Secretariat.