The recent Notification No. 9/2025-Integrated Tax (Rate) dated 17th September 2025 has restructured IGST slabs into seven schedules, effective from 22nd September 2025. While slab changes attract headlines, the real challenge lies in Input Tax Credit (ITC) and compliance alignment, especially for businesses subject to e-invoicing and high-turnover monitoring.
This guidance note provides a complete professional reference on ITC treatment, transitional procedures, and special obligations for large taxpayers.
Why ITC Advisory Matters After IGST Restructuring
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Rate mismatches → ITC mismatches in GSTR-2B.
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Low-rate slabs (0.25%, 1.5%, 3%, 5%) → inverted duty structure risk.
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High-slab capital goods (18%, 28%, 40%) → proportionate reversal or blocked credits.
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E-invoicing systems must reflect revised schedules, else ITC can be denied.
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Large companies face added scrutiny via system analytics, GSTN matching, and e-audit trails.
Transitional ITC Procedure (Sept–Oct 2025 Window)
1. Invoice vs. Supply Date
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Supplies before 22nd Sept but invoiced later must be aligned to time of supply rules (Sec 12).
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Advisory: Maintain delivery challan + invoice evidence to substantiate ITC eligibility.
2. Credit/Debit Notes
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Notes issued post 22nd Sept must reflect the new applicable slab.
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Advisory: Ensure correct adjustment of ITC in September/October GSTR-3B.
3. Goods in Transit
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Goods dispatched before but received after 22nd Sept → ITC must match supplier invoice.
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Advisory: Prepare a stock-in-transit reconciliation report for 21st Sept 2025.
4. GSTR-2B vs GSTR-3B Reconciliation
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Expect mixed slabs in September returns.
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Advisory: Perform weekly reconciliation till October to avoid ITC blocks.
Capital Goods Purchase – ITC Guidance (Rule 43 Focus)
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Eligibility:
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Full ITC → capital goods used exclusively for taxable supplies.
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No ITC → used exclusively for exempt supplies or blocked under Sec 17(5).
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Proportionate reversal → mixed use (Rule 43).
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High-Slab Purchases:
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Machinery (18%), luxury vehicles (28%), yachts/aircraft (40%).
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ITC blocked if for personal/employee use, allowed if strictly used in taxable business.
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Transitional Purchases:
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Invoiced before 22nd Sept but received later → ITC claim depends on invoice rate.
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Invoiced after 22nd Sept → ITC must reflect revised slab.
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Advisory: Keep board approvals, CAPEX files, and asset registers ready for scrutiny.
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Disposal of Capital Goods:
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On sale/scrap, pay GST on transaction value or ITC reduced by 5% per quarter, whichever is higher.
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E-Invoicing & High-Turnover Companies – Special Advisory
E-invoicing (currently applicable for businesses with turnover ≥ ₹5 crore, and monitored strictly for those above ₹100 crore) adds an additional compliance layer during a rate change:
1. E-Invoicing Master Data Update
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ERP/e-invoice portals must be updated with revised tax masters (HSN → rate mapping).
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Errors in e-invoice generation will result in invoice rejection and blocked ITC for recipients.
2. High-Turnover Scrutiny
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GSTN runs system analytics for large taxpayers (>₹100 crore) to detect rate misclassification.
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Even minor errors (e.g., 5% vs 18%) can trigger automated notices.
3. Invoice-Level ITC Matching
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For large companies, B2B recipients rely heavily on e-invoices for ITC.
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A wrongly issued e-invoice = ITC mismatch for all counterparties.
4. Group/Branch Compliance
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Conglomerates with multiple GSTINs must ensure uniform adoption of revised rates across entities.
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Advisory: Issue group-wide SOPs and training for sales/finance teams.
5. Audit Trail & Litigation Risk
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Large companies are more likely to face detailed audits post slab change.
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Advisory: Maintain detailed documentation of internal instructions, ERP changes, and reconciliations as evidence of “good-faith compliance.”
Sectoral Caution Points
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Agro & Fertilisers – Inputs 18%, outputs 5% → ITC inversion. Refund eligibility restricted.
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Jewellery & Diamonds – Multiple slabs (0.25%, 1.5%, 3%) → refund litigation likely.
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Retail & FMCG – Advertising/distribution ITC subject to Rule 42 reversals.
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Automobiles & Luxury – ITC blocked unless used for taxable transport/training.
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Renewables – Inputs at 18%, outputs at 5% → refund strategy critical.
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High-Turnover Traders/Exporters – Must automate reconciliations to avoid ITC blockage across multi-state operations.
ITC Compliance Checklist
- Update HSN mapping & ERP tax masters.
- Reconcile supplier invoices with e-invoicing portal data.
- Review Rule 42/43 reversals (common input & capital goods).
- Segregate blocked credits upfront.
- File timely refunds for inverted duty structures.
- Prepare cut-off stock reports for Sept 2025.
- Issue group-level compliance circulars (for high-turnover companies).
Practical Illustrations
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Solar panel (5%) → ITC eligible, but Rule 43 reversal if project partly exempt.
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Luxury SUV (28%) → ITC blocked unless used exclusively for taxable passenger transport.
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Rough diamond (0.25%) → Refund claim possible under Rule 89; documentation critical.
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Cement (18%) used in office construction → ITC fully disallowed (Sec 17(5)).
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ERP mismatch (e-invoicing) → Invoice rejected → ITC blocked for buyer until corrected.
Final Professional Insight
The IGST restructuring is a dual compliance challenge:
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Classification accuracy under the new schedules.
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Flawless ITC management, especially for capital goods, inverted duty refunds, and e-invoicing alignment.
High-turnover businesses must treat this as a compliance transformation project: revising ERP, strengthening internal audits, and training teams. SMEs, meanwhile, should focus on invoice accuracy and ITC eligibility checks to protect working capital.
Read our companion post: [GST Rates Restructured from 22nd Sept 2025 – Categories, Examples & Business Impact]
