GST Rates and Slabs in India: The Current Structure Explained

GST rates decide how much tax goes on every line of your invoice. Since 22 September 2025, India has used a simpler structure — often called GST 2.0 — with two main slabs of 5% and 18% and a 40% rate for a short list of luxury and sin goods.

This guide explains the current slabs, the special rates that still apply, how a rate is split on an invoice, and how to find the right rate for your product or service. For background on how GST itself works, see what is GST.

What are the GST slabs in India now?

The GST Council, at its 56th meeting, recommended rationalising rates. The CBIC notified the new goods rates in Notification No. 9/2025-Central Tax (Rate) and related notifications, effective 22 September 2025.

Slab	Typical use	Intra-state split	Inter-state
0% (nil/exempt)	Fresh produce, unbranded staples, certain essential services	—	—
5%	Merit rate: many daily-use goods, items earlier at 12%, some services without ITC	2.5% CGST + 2.5% SGST	5% IGST
18%	Standard rate: most goods and services, many items earlier at 28%	9% CGST + 9% SGST	18% IGST
40%	Special rate for select luxury and sin goods	20% CGST + 20% SGST	40% IGST

Some goods carry special low rates outside the main slabs — gold, silver and jewellery, and rough precious and semi-precious stones, for example. Look up the exact rate for your HSN in the current notification rather than relying on memory. Tobacco and related products followed separate transition arrangements tied to the closure of the compensation cess, so check the current position before billing them.

What changed from the old 5/12/18/28 structure?

Before 22 September 2025 there were four main slabs — 5%, 12%, 18% and 28% — with compensation cess on top for some goods. The rationalisation:

• moved most items from 12% to 5%,
• moved most items from 28% to 18%,
• placed a small group of luxury and sin goods at 40%,
• exempted or reduced rates on a number of essentials and some services.

The practical effect for businesses was a one-time exercise: update every item's rate in the product master, apply the transition rules for orders straddling the date, and revise price lists. If your item master still shows 12% or 28% for a product, it is almost certainly out of date — verify against the notification for that HSN code.

How do you find the GST rate for a product or service?

The rate is tied to classification, not to the name you give the product.

1. Classify the goods under HSN (Harmonised System of Nomenclature) or the service under SAC (Services Accounting Code).
2. Look up that code in the current rate notification on the CBIC tax information portal. Goods rates are in the goods rate notification schedules; services rates are in the services rate notification.
3. Check conditions. Many entries apply only if a condition is met — for example, "pre-packaged and labelled", "other than branded", or "without input tax credit".
4. Check exemptions in the separate exemption notifications.
5. Record the rate against the item in your billing system so every invoice uses it consistently.

When in doubt over classification, a professional opinion or an advance ruling for your own business gives certainty; advance rulings bind only the applicant.

Worked example: calculating GST at different slabs

A Pune hardware shop issues one invoice to a local contractor (intra-state, Maharashtra) with three items:

Item	Taxable value (₹)	Rate	CGST (₹)	SGST (₹)	Line total (₹)
Item A (5%)	8,000	5%	200	200	8,400
Item B (18%)	25,000	18%	2,250	2,250	29,500
Item C (18%)	4,500	18%	405	405	5,310
Total	37,500		2,855	2,855	43,210

If the same goods were shipped to a contractor in Goa, the shop would charge IGST instead: ₹400 + ₹4,500 + ₹810 = ₹5,710, the same total tax as ₹2,855 + ₹2,855. See CGST vs SGST vs IGST for why.

Working backwards from an MRP-style inclusive price. If a product is sold for ₹1,180 including 18% GST, the taxable value is ₹1,180 × 100 ÷ 118 = ₹1,000, and the tax is ₹180. At 5%, an inclusive price of ₹1,050 means ₹1,000 taxable and ₹50 tax. The GST calculator does this both ways.

How are services taxed?

Services follow the same slab logic, with a few patterns worth knowing:

• 18% is the default for most business services — IT, consulting, advertising, professional services, renting of commercial property, and so on.
• 5% without ITC applies to several services where the government chose a lower rate in exchange for denying credit, such as many restaurant services.
• Some transport services have an option between a lower rate without credit and a higher rate with credit.
• Certain services are exempt, for example many healthcare and educational services.
• Some services are taxed under reverse charge, where the recipient pays the tax at the applicable rate.

What happens to supplies made around a rate change?

Section 14 of the CGST Act fixes the time of supply when the rate changes. It looks at three events — the supply, the invoice and the payment — and generally applies the rate in force when two of the three occurred.

Supply	Invoice	Payment	Rate that applies
Before change	Before	Before	Old
Before change	Before	After	Old
Before change	After	Before	Old
Before change	After	After	New
After change	Before	Before	Old
After change	Before	After	New
After change	After	Before	New
After change	After	After	New

Getting this right mattered for every business that had open orders on 22 September 2025, and it will matter again for any future rate change.

How should you update your price list and item master after a rate change?

A rate change is mostly a data exercise. A sensible sequence for a small business:

1. Export your item list with HSN/SAC codes and current rates.
2. Match each HSN against the current rate notification and note the new rate and any conditions.
3. Decide pricing: if the rate fell, pass on the benefit by reducing the tax-inclusive price; if it rose, decide whether to absorb or revise.
4. Update the master on the effective date, not before, so invoices issued earlier keep the old rate.
5. Review open orders and advances using the section 14 table above.
6. Reprint shelf labels and quotations that show tax-inclusive prices.
7. Check the first week's invoices for items still billed at old rates.

Example: passing on a rate cut

A product was sold at ₹1,120 including 12% GST (taxable value ₹1,000). After its rate fell to 5%, keeping the taxable value at ₹1,000 gives a new inclusive price of ₹1,050 — a ₹70 reduction for the customer. Keeping the inclusive price at ₹1,120 would instead raise the taxable value to ₹1,120 × 100 ÷ 105 ≈ ₹1,066.67, which keeps the rate benefit with the seller rather than the buyer.

	Before	After (benefit passed on)
Taxable value	₹1,000	₹1,000
GST	₹120 (12%)	₹50 (5%)
Price to customer	₹1,120	₹1,050

Businesses are expected to pass on the benefit of rate reductions to customers by way of commensurate price reductions, so document how you repriced.

Composite and mixed supplies

When several items are sold together, the rate depends on how they are bundled. A composite supply is naturally bundled with one principal supply — for example, goods sold with packing, transport and insurance charged on the same invoice — and the whole bundle takes the rate of the principal supply. A mixed supply is a combination of items that could be sold separately but are offered for a single price, such as a gift hamper of sweets, dry fruits and a decorative box; the whole hamper takes the highest rate among its items. If a Pune shop sells a ₹2,000 hamper containing items at 5% and 18%, GST is charged at 18% on the full ₹2,000, that is ₹360, unless the items are priced and invoiced separately.

Which goods were carved out of the 22 September 2025 date?

The GST Council's own FAQs on the 56th meeting state that the new rates on services and on goods apply from 22 September 2025, except for cigarettes, chewing tobacco products such as zarda, unmanufactured tobacco and beedi. For those, the existing rates and compensation cess continue until a date to be notified separately. If you sell these items, do not simply switch them to the 40% rate in your item master; follow the notification that actually brings their change into force.

The same FAQs make two other points that matter at the counter:

1. The rate follows the date of supply under the time-of-supply rules, not the date of the purchase. Stock bought before 22 September at the old rate is still sold at the new rate if the supply happens afterwards.
2. Registration thresholds did not change. The rate rationalisation altered tax rates, not the turnover limits for registration. See GST registration threshold limit.

A quick check for a retailer with old stock

A Thane household-goods shop bought an item in August at 12% and still has ₹50,000 (taxable value) of it on 22 September, when that item's rate becomes 5%. Sales from 22 September carry 5% GST: ₹2,500 instead of ₹6,000 on that value. According to the Council's FAQs, credit already duly availed in the electronic credit ledger can still be used to pay output tax. The position is different if the item became exempt: the FAQs say ITC has to be reversed for exempt supplies made on or after 22 September, as the CGST Act requires. The FAQs also clarify that a refund of accumulated credit is not available merely because the same goods were taxed at different rates at different times.

Common mistakes with GST rates

• Keeping an old 12% or 28% rate in the item master after the September 2025 change.
• Choosing a rate by product name instead of by HSN/SAC classification and conditions.
• Ignoring conditions such as "pre-packaged and labelled" or "without ITC".
• Applying a rate to the inclusive price instead of the taxable value.
• Charging tax on exempt items to "be safe" — this is not allowed and confuses your customer's ITC.
• Mixing rates on a composite supply. A composite supply takes the rate of its principal supply; a mixed supply takes the highest rate among its items.

Billing Software by Betterwork stores the HSN/SAC and rate on each item, splits it automatically into CGST+SGST or IGST and shows a rate-wise summary on the invoice and in reports, so a one-time master update carries into every bill. You can also start with our invoice templates.

Key takeaways

• Since 22 September 2025, the main GST slabs are 5% and 18%, with 40% for select luxury and sin goods.
• Nil/exempt supplies and special rates (such as those on gold and precious stones) still exist.
• Rates follow HSN/SAC classification and their conditions, not product names.
• Intra-state: split the rate equally into CGST and SGST; inter-state: charge the full rate as IGST.
• Section 14 decides which rate applies to supplies straddling a rate change.
• Update your item master and recheck rates against the official notification.

This guide is general information, not tax advice. Rules last checked on 20 October 2026; confirm with your tax professional for your situation.