New GST Rates in India: Goods and Services Tax Slabs & Revisions

Understanding GST rates is essential for every business operating in India, as they directly influence pricing, profitability, and overall compliance. The Goods and Services Tax (GST) system - introduced in 2017 - streamlined multiple indirect taxes into a unified structure, making taxation more transparent and business-friendly.

India’s GST framework is now entering a major reform phase with the 56th GST Council meeting unveiling GST 2.0 - a next-generation overhaul that simplifies tax slabs into 5%, 18%, and 40%, effective from September 22, 2025. These updated GST rates aim to reduce complexity, promote ease of doing business, enhance consumer confidence, and support economic growth. For businesses, understanding how these revised GST rates apply to various goods and services is crucial for accurate cost planning, competitive pricing, and long-term financial strategy.

Latest GST Rates Updates

Staying informed about the latest GST updates is crucial for businesses to ensure compliance and accurate tax planning. With the introduction of GST 2.0 and ongoing refinements by the GST Council, several key changes have been proposed and implemented to simplify the tax structure and improve efficiency. Below are the most recent updates and highlights related to GST rates in India:

• GST 2.0 introduced in the 56th GST Council Meeting, featuring a simplified three-slab structure of 5%, 18%, and 40%, replacing multiple existing slabs.
• New GST rates becoming effective from September 22, 2025, impacting a wide range of goods and services across sectors.

• Rationalisation of rates for essential items to reduce the burden on consumers and encourage broader market participation.
• Revision of GST rates for select goods and services to align with economic priorities, consumption trends, and industry needs.
• Increased focus on digital compliance, including improved return filing systems and automated reconciliations to support businesses.
• Review of compensation cess for specific luxury and sin goods under the new 40% slab.
• Proposed review mechanisms to ensure faster resolution of industry demands, anomalies, and classification issues within GST 2.0.
• Enhanced transparency and ease of doing business, with clearer rate structures to reduce disputes and compliance complexities.

What is GST and Why Does It Matter for Businesses?

GST is a destination-based, comprehensive tax levied on every stage of the supply chain, from manufacturing to consumption. It subsumes various indirect taxes previously levied separately by the central and state governments, ensuring a single, uniform tax structure across the country.

For businesses, GST plays a crucial role in shaping tax planning and operations, offering several key advantages that streamline processes and improve financial efficiency.

• Reduces cascading tax effects: Credits for taxes paid at earlier stages are available, lowering overall tax liability.
• Simplifies compliance: A single tax replaces multiple levies, making compliance easier.
• Enhances competitiveness: Uniform tax rates across states help create a common national market.
• Affects pricing directly: The GST rates applicable to goods and services influence the final price paid by consumers.

A clear understanding of GST rates in India is important for accurate billing, tax filing, and informed strategic decision-making.

Revised GST Rates Structure in India (Effective from Sept 22, 2025)

With the rollout of GST 2.0 and recent announcements made during the 56th GST Council Meeting, several important updates have been introduced to streamline India’s indirect tax system. These changes aim to simplify compliance, rationalise tax structures, and make GST more business-friendly. Below are the latest updates and developments businesses should be aware of:

• GST 2.0 introduces a simplified three-slab structure of 5%, 18%, and 40%, replacing the earlier multi-rate system.
• New GST slabs become effective from September 22, 2025, impacting goods and services across key sectors.
• Rationalisation of essential goods tax rates to reduce consumer burden and improve affordability.
• Adjustment of GST rates on selected services and products to align with evolving industry needs and government priorities.
• Continued focus on digital tax compliance, including easier filing, automated reconciliations, and streamlined return systems.
• Revised compensation cess structure applicable for luxury goods and items under the 40% slab.
• Greater emphasis on resolving classification issues and anomalies to promote clarity and reduce disputes.
• Steps toward enhancing ease of doing business, ensuring a more predictable, transparent, and simplified GST regime.

GST Slab Rates and Their Applicability

The GST rate structure for various commonly-used consumable products is outlined in the table below. These rates help consumers and businesses understand the tax applicable on everyday goods, ensuring better cost planning and compliance with the latest GST guidelines.

The 0% GST slab, also known as nil-rated or exempt supplies, covers essential goods and services to make daily necessities affordable. This slab includes staple foods, unbranded groceries, and basic household items. By keeping these items tax-free, the government ensures that essential commodities remain accessible to everyone. Under GST 2.0, the 0% rate continues to benefit households and small businesses that rely on these products for daily consumption, ensuring financial relief and compliance simplicity.

Common items under 0% GST

• Fresh fruits and vegetables
• Unbranded cereals and grains (rice, wheat, millets, dals)
• Eggs, unbranded pulses
• Unbranded milk and basic dairy products
• Basic bread, rotis, parathas, chapatis
• Unbranded staples and everyday household essentials

5% GST Rate List Items

The 5% GST slab applies to essential packaged goods and household items, balancing revenue generation with affordability. This slab covers processed staples, packaged foods, and daily-use products, reducing the cost burden for consumers. Many items previously in higher slabs have been rationalised into the 5% rate under GST 2.0 to ensure accessibility and encourage wider adoption. It also supports small businesses and retailers who sell these essential goods by keeping taxation manageable.

Typical items under 5% GST

• Pre-packaged dairy products (paneer, cheese, butter, ghee, processed milk)
• Packaged cereals and bakery items
• Snacks, namkeens, and packaged staples
• Everyday household goods and toiletries (soap, toothpaste, basic hygiene items)
• Selected processed staples and packaged grains

18% GST Rate List Items

The 18% GST slab is the standard rate for the majority of goods and services, covering consumer durables, branded products, and most services. Under GST 2.0, items not classified as essential or luxury fall under this slab. This ensures a balanced tax system, allowing the government to collect revenue while keeping goods and services accessible. Most branded consumer products, professional services, and dining services at restaurants are included, making it the most common GST rate in India.

Common items under 18% GST

• Consumer durables and electronics (TVs, home appliances, white goods)
• Telecom and financial services
• Branded goods, garments, footwear, furniture, and home furnishings
• Restaurant services (dine-in at most establishments)
• Processed and value-added goods not covered under essential or luxury categories

40% GST Rate List Items

The 40% slab, introduced under GST 2.0, applies to luxury, “sin,” and high-end items. This high tax rate is designed to discourage consumption of non-essential or socially sensitive goods while generating additional revenue. It includes premium vehicles, luxury products, and harmful goods that are not part of everyday consumption. This slab represents the top tier of GST rates, targeting discretionary spending and high-value goods.

Items under 40% GST

• Tobacco products (cigarettes, cigars, chewing tobacco)
• Pan masala, gutkha, and related products

• Aerated drinks and certain energy drinks
• Luxury vehicles, high-end cars, motorcycles above specified engine capacities
• Yachts, personal-use aircraft, and other luxury goods classified under the “sin” category

GST Slab Rates for Other Niche

28% GST Rate List Items

The 28% slab previously covered luxury items, high-end electronics, and certain consumer goods. Under GST 2.0, many of these items have moved to the 40% slab, but legacy items may still fall under this category for transitional purposes.

Typical items under 28% GST

• Certain luxury goods and high-end consumer products
• High-end electronics and appliances previously categorised as luxury items

3% GST Rate List Items

The 3% GST slab applies to precious metals and jewellery, providing a special concession for high-value commodities that are not everyday goods.

Items under 3% GST

• Gold jewellery and ornaments
• Silver and platinum jewellery
• Other precious-metal products

0.25% GST Rate List Items

The 0.25% GST slab is a niche rate for semi-precious and rough stones, reflecting their specific classification outside normal consumer goods.

Items under 0.25% GST

• Rough or semi-precious stones
• Other niche supplies classified under precious stones

Why Businesses Need to Understand GST Slab Rates

Knowing the applicable GST rate for your goods or services ensures accurate pricing, tax compliance, and smooth operations. Misclassification can result in penalties and disrupt cash flow.

As per GST slab rates India 2025, businesses must stay updated with government notifications, as periodic changes are made to encourage certain sectors and regulate consumption patterns.

GST Rate 28%: Luxury and Sin Goods

Luxury goods, high-end consumer durables, and sin products, including air conditioners, washing machines, cigarettes, aerated drinks, and premium vehicles, attract a 28% GST, with some items also subject to an additional cess for higher revenue.

This multi-tier tax system helps maintain affordability for essentials while ensuring higher revenue from non-essential, high-value products and services.

GST Rates Changes Effective from Sept 22, 2025

The GST rates in India have been simplified under GST 2.0, effective 22 September 2025. The new structure includes 5%, 18%, and 40% slabs, along with 0% (nil-rated) for essential items. Businesses must follow these revised rates for compliance, pricing, and financial planning. Below is an example of how key categories are now classified:

Also Read: GST Registration Process – How to Apply Online

GST Rates by Business Category in India

GST on Essential Goods

Essential goods, such as unpackaged food grains, milk, eggs, and fresh produce, are taxed at 0% to ensure affordability for all. Packaged essentials, including sugar, edible oils, and baby milk formula, now fall under the 5% GST slab. This updated structure supports food security, reduces the cost burden on households, and promotes public welfare while maintaining compliance simplicity for businesses.

GST on Services

Services in India are classified under the same GST slab structure as goods. Educational and healthcare services continue to attract 0% GST, reinforcing their societal importance. Most consumer services, such as transportation, telecom, and financial services, now fall under the 18% slab, while high-end services like five-star hotel accommodations and business-class air travel are also included in the 18% standard slab. This simplification ensures consistent tax treatment across most service categories.

GST on Luxury Goods

Luxury goods and “sin” products are now taxed at the top 40% GST slab, replacing the previous 28% slab. This includes items such as luxury cars, high-end air conditioners, tobacco products, and other premium or harmful goods. The higher rate serves both revenue generation and public health objectives, while clearly distinguishing luxury and discretionary items from essential goods and standard consumer products.

Also Read: What is IGST? Full Form, Meaning & How It Works in India

How Input Tax Credit (ITC) Works with GST Rates

A key feature of GST is the input tax credit (ITC), which allows businesses, including those availing a business loan, to deduct the GST paid on inputs from the GST collected on outputs. This mechanism prevents the “tax-on-tax” effect common in previous indirect tax regimes. ITC reduces the effective tax rate for businesses, making compliance and cost management more efficient.

For example, a manufacturer buying raw materials taxed at 18% can claim credit for this GST when selling the finished product (also taxed at 18%). This leads to only the “value addition” being taxed, creating a seamless flow of credits across the supply chain.

How to Stay Updated on GST Rate Changes?

GST rates in India are not static; they can change after every meeting of the GST Council, which reviews and sometimes revises rates based on economic and social considerations. To stay compliant, businesses should:

• Monitor official notifications: Central Board of Indirect Taxes and Customs (CBIC) releases detailed notifications after every GST Council meeting.
• Use government portals: The official GST portal and GST rate finder tools provide up-to-date information on GST rates for specific goods and services.
• Follow reputable tax advisors: Tax consultants and financial news outlets often provide timely updates and analysis of GST changes.

Being proactive about these updates helps businesses avoid compliance risks and pricing errors.

Also Read: What is CGST (Central Goods and Services Tax) in India

Impact of GST Rates on Business Pricing and Strategy

GST rates for businesses play a crucial role in determining product and service pricing, which in turn affects profitability and market competitiveness. A higher GST rate can increase the final selling price, potentially reducing demand, while a lower rate may allow businesses to offer more competitive prices and attract customers. Strategic pricing decisions must account for GST compliance, input tax credits, and changing slab rates.

Example:

Consider a small electronics retailer operating under the 18% GST slab. If the GST rate for certain accessories drops to 12%, the retailer can reduce prices, boosting sales volumes without compromising margins. Conversely, a rate hike may force them to adjust pricing upward, impacting demand and requiring promotional offers to stay competitive.

Understanding the GST impact on pricing helps businesses adapt strategies quickly and maintain profitability in a dynamic tax environment.

Conclusion

Understanding GST rates in India is crucial for businesses to ensure compliance, optimize costs, and make informed pricing decisions. With the introduction of GST 2.0, the simplified slab structure - 0% for essential goods and services, 5% for packaged essentials, 18% for most goods and services, and 40% for luxury and sin items - streamlines taxation across the economy. Staying updated with official notifications and applying these rates effectively allows businesses to plan operations efficiently, maintain financial transparency, and remain competitive in the Indian market. Integrating the new GST structure into business strategies ensures clarity, compliance, and sustainable growth.

FAQs

Q.1. How many GST slabs are there in India?

A. India’s GST structure now comprises four primary slabs: 0% (nil-rated) for essential goods and services, 5% for packaged essentials, 18% for most goods and services, and 40% for luxury and sin items. Special or niche rates may still apply to select commodities, such as precious metals and stones.

Q.2. What is the highest GST rate applicable?

A. The highest standard rate is 40%, mainly for luxury items and sin goods; some also face additional cess for extra revenue.

Q.3. Are GST rates different for goods and services?

A. Most goods and services fall under the same rate slabs; however, some services, such as education and healthcare, enjoy specific exemptions or zero rates.

Q.4. Where can I check the latest GST updates?

A. The official GST portal, government notifications, and reliable tax advisory platforms offer up-to-date GST rate information and details on changes.

Q.5. Is GST applicable to small businesses?

A. GST applies if turnover exceeds the threshold; small businesses can opt for composition schemes with lower, turnover-based GST rates.

Q.6. How does GST impact business pricing?

A. GST rates directly affect product and service prices; higher rates increase costs, while lower or zero rates keep basic necessities affordable for consumers.

Q.7. Can GST rates be reduced over time?

A. The GST Council regularly reviews and may reduce rates, merge slabs, or remove exemptions to simplify the tax system and improve compliance.

Q.8. Can GST rates change during the financial year?

A. Yes, GST rates for businesses can change during the financial year if the GST Council announces revisions. These changes may be introduced to align with economic priorities, correct anomalies, or make essential goods and services more affordable. Businesses must stay updated on such announcements to adjust pricing, procurement, and compliance strategies accordingly.

Q.9. How does GST affect small businesses and startups?

A. GST impacts small businesses and startups by standardizing tax compliance and eliminating multiple indirect taxes. While it simplifies operations, the GST impact on pricing can influence their competitiveness - especially if they operate in higher tax slabs. Small enterprises can benefit from input tax credits, but they must also invest in proper accounting and timely GST filings to avoid penalties.

Q.10. What is the GST rate on business loan processing fees?

A. Business loan processing fees fall under the category of financial services and attract 18% GST. This means lenders will add GST to the processing charges, increasing the total upfront cost for the borrower. Businesses should factor this into their financing decisions to assess the true cost of borrowing.

Q.11. Which items fall under the 0% GST rate category?

A. The 0% GST slab applies to essential goods and services to ensure affordability. This includes unpackaged food grains, fresh fruits and vegetables, eggs, milk, basic dairy products, and essential healthcare and education services. Nil-rated items are exempt from GST to reduce the financial burden on households.

Q.12. What is 5% GST items list?

A. The 5% GST slab covers packaged essentials and everyday household items. Key examples include packaged sugar, edible oils, packaged dairy products, cereals, bakery items, and personal care essentials. This slab is designed to keep essential consumer goods affordable while maintaining a moderate tax contribution.

Q.13. Which items come under the 18% GST slab?

A. The 18% GST slab is the standard rate for the majority of goods and services. It includes consumer durables, electronics, branded garments, furniture, telecom services, financial services, transportation, and most restaurant services. This slab ensures balanced taxation for the broad spectrum of goods and services in the economy.

Q.14. What are the changes in GST slab revision 2025?

A. The 2025 GST revision, also called GST 2.0, simplified the GST structure into four primary slabs: 0%, 5%, 18%, and 40%. Key changes include removal of multiple previous slabs like 12% and 28% for most items, reclassification of essential goods into 0% and 5%, and introducing 40% for luxury and sin goods to better align taxation with social and economic priorities.

Q.15. Is 28% GST removed?

A. Yes, under GST 2.0, the 28% slab has been replaced. Most luxury and sin goods previously taxed at 28% now fall under the 40% slab, while other items have been reclassified into 5% or 18% based on their category.

Q.16. Which products are exempt from GST completely?

A. Products completely exempt from GST include essential food items like unpackaged grains, eggs, milk, fresh fruits and vegetables, as well as essential healthcare and educational services. These items are classified under the 0% GST slab to ensure affordability and accessibility.

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