Handling a GST rate change in billing

Why rate changes catch businesses out

Rates are changed by notification from the GST Council's decisions, sometimes for a handful of items, sometimes widely, as in the rationalisation that took effect on 22 September 2025. On the changeover day, invoices for orders taken earlier, advances already received and goods already dispatched all have to be billed at the right rate. Section 14 of the CGST Act decides which.

The two-out-of-three rule

The date of payment is the earlier of the date it is entered in your books or credited to your bank account, with a special rule where the bank credit comes more than four working days after the rate change. This is general information, not tax advice.

Worked examples

Suppose an item's rate drops from 18% to 5%, effective on a given date.

Order shipped before, billed after, paid after. Goods worth ₹1,00,000 left your godown two days before the change; you invoice and receive payment after it. Two of three after: new rate, GST ₹5,000.

Advance before, supply and invoice after. A customer paid ₹50,000 in advance before the change; you deliver and invoice after. Two of three after: new rate. For goods, GST is not payable on advances anyway; for services, adjust the tax already paid on the advance.

Invoiced before, delivered after, paid after. Two of three after: new rate. If the invoice showed 18%, issue a credit note for the difference so the customer is billed correctly.

Checklist for the changeover day

1. List affected items and their HSN codes from the notification.
2. Update GST rates in item masters with the effective date, not by overwriting history, so old invoices still show the old rate.
3. Check pending sales orders, quotations and proforma invoices; revise prices or tax shown.
4. Identify goods dispatched but not invoiced, and advances received but not adjusted.
5. Revise price lists and MRP-based pricing; decide whether to pass on a rate cut. See price list management for dealers.
6. Brief the billing staff: which invoices go out at which rate, and who to ask when unsure.
7. Recheck the HSN summary of the month, as one HSN can carry two rates in that month; see HSN summary in GSTR-1.

Stock in hand and ITC

A rate change does not, by itself, require you to reverse ITC already claimed on stock bought at the old rate. You may end up with ITC higher than your new output tax if the rate drops; that credit stays in the credit ledger to be used later. Where an item moves to exempt or nil, ITC rules for exempt supplies apply from that date, and stock-related credit may need reversal. Take advice in that case.

Common mistakes

• Editing the rate in the item master without an effective date, so reprinting an old invoice shows the new rate.
• Billing pending orders at the old rate because the order said so.
• Issuing a fresh invoice instead of a credit or debit note to correct the rate on an invoice already issued.
• Assuming the change applies from the date of the Council meeting instead of the notified effective date.

Rate changes with Tally and Cashflow OS

TallyPrime lets you set GST rate details with an 'applicable from' date at item, group or company level, so update rates there. Cashflow OS syncs your items from Tally; when sales orders or invoices are created from the phone with writing back switched on, GST is worked out from the item and the party's state using what Tally holds. Price lists in Cashflow OS can be revised for the new prices. Confirm the rates themselves from the official notification.