What are the new GST rates in India after GST 2.0?

India now has three main GST slabs after the GST 2.0 reform effective September 22, 2025. The 5% merit rate applies to essential goods like packaged food, medicines, and basic clothing. The 18% standard rate covers most goods and services including consumer durables, professional services, and telecom. The new 40% luxury rate applies to tobacco, aerated beverages, luxury vehicles, and sin goods. The earlier 12% and 28% slabs have been completely abolished. Items from the 12% slab moved to either 5% or 18%, and items from the 28% slab moved to either 18% or 40%. Additionally, several items including life and health insurance moved to 0% GST.

When did the new GST rates come into effect?

The new GST rates under GST 2.0 came into effect on September 22, 2025. The reforms were approved by the 56th GST Council on September 3, 2025. Any invoice issued from September 22, 2025 onwards must use the new rates. Invoices issued before this date follow the old rate structure. If you had pending invoices or advance payments received before September 22, the old rates apply to those transactions. For ongoing contracts, the rate applicable is the one in force on the date of supply.

What happened to the 12% GST slab?

The 12% GST slab has been completely abolished under GST 2.0. All items that were at 12% have been moved to either 5% or 18%. Essential items like packaged food, soaps, juices, and medicines moved down to 5%. Non-essential items like processed food, furniture, and building materials moved up to 18%. This simplification was one of the primary goals of GST 2.0 — reducing the number of slabs from four to three makes classification easier and reduces disputes about which rate applies to a product.

Is insurance still taxed under GST after the reform?

Life insurance and health insurance premiums are now exempt from GST — they moved from 18% to 0%. This was one of the most celebrated changes in GST 2.0 as it directly reduces the cost of insurance for every Indian. Previously, an annual health insurance premium of Rs 25,000 included Rs 4,500 in GST. Now that entire amount goes toward coverage. General insurance like motor insurance and fire insurance remains at 18%. If you are an insurance agent or broker, update your invoicing to reflect 0% GST on life and health premiums.

How do I update GST rates in my billing software?

In myBillPlease, go to Products from the sidebar. Click on any product to edit its details. Change the GST Rate field to the new percentage. Save. The updated rate will apply to all future invoices for that product. For large catalogs with hundreds of products, use the CSV bulk update feature — export your product list, change the GST rate column in Excel for affected items, and re-import. myBillPlease will match products by HSN code or SKU and update the rates. Verify by creating a test invoice after updating. If you use our free GST calculator at mybillplease.com/tools/gst-calculator, it shows calculations at any rate you enter.

What items are now at 40% GST?

The new 40% GST slab applies exclusively to luxury and sin goods. This includes all tobacco products like cigarettes, cigars, chewing tobacco, pan masala, and gutka. Aerated and sugary beverages including carbonated drinks, energy drinks, and sweetened drinks also fall under 40%. Luxury vehicles above Rs 20 lakh, sports bikes above 350cc, yachts, private jets, and premium cosmetics are in this bracket. High-end watches above Rs 1 lakh and designer goods also attract 40% GST. This rate is higher than the old 28% that applied to these categories, reflecting the government's policy of heavily taxing harmful and luxury consumption.

Do I need to change my HSN codes after GST 2.0?

In most cases, no. HSN codes classify products by type, not by GST rate. The same HSN code applies to a product regardless of which GST slab it falls under. However, some items have been reclassified under different HSN headings as part of the reform. For example, certain packaged food items that moved from 12% to 5% may have updated sub-classifications. The safest approach is to verify your HSN codes using the official CBIC notifications or our HSN code directory at mybillplease.com/hsn. Using the wrong HSN code can attract a penalty of Rs 50 per invoice up to a maximum of Rs 25,000 per financial year under Section 125 of the CGST Act.

GST Rates & Lists

New GST Rates List 2026: Complete Guide After GST 2.0 Reform

The 12% and 28% GST slabs are gone. India now has three main rates: 5%, 18%, and 40%. Here is the complete updated list of GST rates effective from September 22, 2025.

Himanshu22 March 2026 · 7 min read · updated 6 September 2026

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Key takeaways

GST 2.0, approved by the 56th GST Council and effective September 22, 2025, abolished the 12% and 28% slabs.
The structure is now 0%, 5%, 18% and 40%: essentials moved down to 5%, non-essentials up to 18%, white goods down from 28%.
Life and health insurance, roti, paneer, UHT milk and notebooks below Rs 50 moved to 0%.
The new 40% slab covers tobacco, aerated drinks, vehicles above Rs 20 lakh, bikes above 350cc and premium goods, with cess continuing on tobacco.

What Changed in GST 2.0?

On September 3, 2025, the 56th GST Council approved the biggest overhaul of India's indirect tax system since GST was introduced in 2017. Dubbed GST 2.0, the reform simplified the rate structure by abolishing the 12% and 28% slabs and introducing a new 40% luxury rate. The changes took effect on September 22, 2025.

Before GST 2.0, India had four main tax slabs: 5%, 12%, 18%, and 28% — plus a cess on certain items. This created confusion for businesses trying to classify products and frequent disputes about which slab applied. The new structure aims to fix this with just three primary rates.

This guide covers every change in detail — which items moved between slabs, the new 40% luxury category, what went to 0% (tax-free), and how this affects your GST invoicing and filing. We update this page as new notifications are issued. If you create GST invoices, bookmark this page and use our free GST calculator to verify rates for any product.

New GST Rate Structure (Effective September 22, 2025)

Before and after comparison of GST slabs

	Before GST 2.0	After GST 2.0
0% (Exempt)	Essential food, healthcare	Expanded — now includes insurance, more food items
5% (Merit Rate)	Essential goods	Expanded — includes items from old 12% slab
12% (Standard)	Many consumer goods	ABOLISHED — items moved to 5% or 18%
18% (Standard)	Services, consumer durables	Now the main rate — includes items from old 12% and 28%
28% (Luxury + Sin)	Luxury goods, aerated drinks	ABOLISHED — items moved to 18% or 40%
40% (New Luxury)	Did not exist	NEW — luxury and sin goods only
Cess	On top of 28% for some items	Continues on tobacco, pan masala at 40% base

Items Now at 0% GST (Tax-Free)

GST 2.0 expanded the list of exempt items significantly. These products and services now attract zero GST:

Food items moved to 0%: Roti, paratha, paneer, khakhra, UHT milk, certain packaged dal and rice, plain curd, and buttermilk. Previously some of these were at 5% when packaged and branded.

Insurance: Life insurance and health insurance premiums are now exempt from GST. This is one of the most impactful changes for consumers — previously both attracted 18% GST. Term insurance and family health plans are now tax-free.

Other exempt items: Exercise books and notebooks below Rs 50, hearing aids, certain agricultural implements, and sanitary napkins (already exempt, confirmed to remain so).

If you sell any of these items, update your product catalog in your billing software to reflect 0% GST. In myBillPlease, you can bulk-update GST rates for multiple products at once.

Items at 5% GST (Merit Rate) — Expanded List

Many items moved from 12% down to 5% under GST 2.0

Packaged food items — branded rice, atta, sugar, spices (moved from 12%)
Soaps and detergents — bath soap, washing soap, liquid detergent (moved from 12%/18%)
Fruit juices — packaged fruit juices and drinks (moved from 12%)
Medicines — common OTC medicines, first-aid items (moved from 12%)
Bicycles and bicycle parts (moved from 12%)
Auto parts and accessories below Rs 1,000 (moved from 28%)
Small household appliances — mixer grinders, irons below Rs 5,000 (moved from 18%)
Footwear below Rs 1,500 per pair (previously 12%, some categories)
Readymade garments below Rs 1,500 per piece (remains at 5%)
Economy class air travel (remains at 5%)
Restaurant services without AC in non-star hotels (remains at 5%)
Transport services — cab, auto, bus (remains at 5%)

Items at 18% GST — The New Standard Rate

18% is now the standard rate for most goods and services. It absorbed items from both the old 12% and 28% slabs:

Items that moved UP from 12% to 18%: Processed food (frozen items, ready meals), furniture, office equipment, building materials (cement, tiles), and certain industrial inputs. The 12% slab no longer exists — everything in it moved to either 5% or 18%.

Items that moved DOWN from 28% to 18%: This is the bigger win for consumers. TVs above 32 inches, air conditioners, refrigerators, washing machines, dishwashers, and other white goods all dropped from 28% to 18%. This means a Rs 40,000 AC that previously cost Rs 51,200 with GST now costs Rs 47,200 — a saving of Rs 4,000.

Services at 18%: Most professional services remain at 18% — IT consulting, marketing, legal, accounting, design, and other B2B services. Telecom services, financial services, and hotel rooms between Rs 1,000 and Rs 7,500 per night are also at 18%.

Use the HSN code directory to find the exact rate for any product. Each HSN chapter page lists all codes with their applicable GST rates.

New 40% GST Rate — Luxury and Sin Goods

The most controversial change in GST 2.0 is the new 40% slab. It replaces the old 28% rate for luxury and sin goods, effectively increasing tax on these categories by 12 percentage points. Items in this slab include:

Tobacco products: Cigarettes, cigars, chewing tobacco, pan masala, and gutka. These already had cess on top of 28% — now the base rate itself is 40%.

Aerated and sugary beverages: Carbonated drinks, energy drinks, and sweetened beverages moved from 28% + cess to 40%. The government's rationale is public health — discouraging consumption of sugary drinks.

Luxury vehicles: High-end SUVs above Rs 20 lakh, sports bikes above 350cc, and luxury cars. Mid-range vehicles moved to 18%.

Other luxury items: Yachts, private jets, high-end watches above Rs 1 lakh, and premium cosmetics.

For businesses selling these items, the invoice amount changes significantly. Make sure your billing software reflects the new 40% rate. In myBillPlease, update the GST rate in your product catalog — it takes 2 clicks per product, or use CSV bulk update for large catalogs.

How GST 2.0 Affects Different Businesses

Retail Shops

Good news — many FMCG products moved from 12% to 5%. Update product GST rates in your billing software. GSTR-1 and GSTR-3B will reflect new rates automatically for invoices created after Sep 22.

Electronics Sellers

White goods (AC, fridge, washing machine) dropped from 28% to 18%. Update HSN codes and rates. Old stock sold after Sep 22 must use new rates regardless of when purchased.

Restaurants

Non-AC restaurants in non-star hotels remain at 5%. AC restaurants and star hotels remain at 18%. No change in restaurant GST rates under 2.0 — only the removed 12% slab affects catering services (now 18%).

Freelancers and Consultants

Professional services remain at 18%. No rate change, but the simplified slab structure means fewer classification disputes. SAC codes unchanged.

E-Commerce Sellers

Multiple product categories changed rates. Update your entire catalog. If you use myBillPlease with Shopify, update product GST rates in myBillPlease — Shopify invoices will use the new rates automatically.

Insurance Companies

Biggest impact — life and health insurance premiums moved from 18% to 0%. This reduces the cost of insurance for every Indian and was the most demanded change in GST 2.0.

What You Need to Do in Your Billing Software

If you create GST invoices, here is your action checklist after GST 2.0:

1. Update product GST rates. Go through your product catalog and update the GST percentage for items that changed slabs. In myBillPlease, open Products, click on each item, and change the GST rate. For large catalogs, export as CSV, update rates in Excel, and re-import.

2. Verify HSN codes. Some items may have new HSN classifications under the new slab structure. Use the HSN code directory to verify. Wrong HSN codes can trigger a penalty of Rs 50 per invoice (max Rs 25,000 per year) under Section 125 of the CGST Act.

3. Check your GSTR reports. After creating invoices with new rates, generate a test GSTR-1 report to verify the tax breakdowns are correct. The report should show the new rates for post-Sep 22 invoices and old rates for pre-Sep 22 invoices.

4. Inform your customers. If you sell B2B, your customers need to know about rate changes that affect their input tax credit. Send a notification about changed rates on your invoices.

5. Talk to your CA. Discuss how the transition affects your input tax credit balance, especially if you had accumulated credit at old rates. Your CA can advise on transitional provisions.

GST 2.0 Timeline: How We Got Here

July 1, 2017: GST launched with 4 slabs — 5%, 12%, 18%, 28% plus cess. India's biggest tax reform replaces 17 central and state taxes.

2017-2024: Multiple rate revisions through GST Council meetings. Items frequently moved between slabs. The 12% and 28% slabs became increasingly problematic due to classification disputes.

September 3, 2025: The 56th GST Council, chaired by PM Modi, approves GST 2.0 reform. The 12% slab is abolished, 28% is abolished, and a new 40% luxury slab is introduced. This is the most significant restructuring since GST launch.

September 22, 2025: New rates take effect. All invoices from this date must use the new rates. Billing software providers rush to update their systems.

October-December 2025: Transition period. Businesses adjust catalogs and filing processes. Some classification ambiguities resolved through CBIC clarifications.

January 2026 onwards: New rate structure fully operational. Businesses report smoother compliance with fewer slab-related disputes. Government revenue from the 40% slab on luxury goods exceeds projections.

For the latest GST rate notifications and changes, check the official CBIC GST rates page. We update this article as new changes are announced.

Frequently asked questions

What are the new GST rates in India after GST 2.0?: India now has three main GST slabs after the GST 2.0 reform effective September 22, 2025. The 5% merit rate applies to essential goods like packaged food, medicines, and basic clothing. The 18% standard rate covers most goods and services including consumer durables, professional services, and telecom. The new 40% luxury rate applies to tobacco, aerated beverages, luxury vehicles, and sin goods. The earlier 12% and 28% slabs have been completely abolished. Items from the 12% slab moved to either 5% or 18%, and items from the 28% slab moved to either 18% or 40%. Additionally, several items including life and health insurance moved to 0% GST.
When did the new GST rates come into effect?: The new GST rates under GST 2.0 came into effect on September 22, 2025. The reforms were approved by the 56th GST Council on September 3, 2025. Any invoice issued from September 22, 2025 onwards must use the new rates. Invoices issued before this date follow the old rate structure. If you had pending invoices or advance payments received before September 22, the old rates apply to those transactions. For ongoing contracts, the rate applicable is the one in force on the date of supply.
What happened to the 12% GST slab?: The 12% GST slab has been completely abolished under GST 2.0. All items that were at 12% have been moved to either 5% or 18%. Essential items like packaged food, soaps, juices, and medicines moved down to 5%. Non-essential items like processed food, furniture, and building materials moved up to 18%. This simplification was one of the primary goals of GST 2.0 — reducing the number of slabs from four to three makes classification easier and reduces disputes about which rate applies to a product.
Is insurance still taxed under GST after the reform?: Life insurance and health insurance premiums are now exempt from GST — they moved from 18% to 0%. This was one of the most celebrated changes in GST 2.0 as it directly reduces the cost of insurance for every Indian. Previously, an annual health insurance premium of Rs 25,000 included Rs 4,500 in GST. Now that entire amount goes toward coverage. General insurance like motor insurance and fire insurance remains at 18%. If you are an insurance agent or broker, update your invoicing to reflect 0% GST on life and health premiums.
How do I update GST rates in my billing software?: In myBillPlease, go to Products from the sidebar. Click on any product to edit its details. Change the GST Rate field to the new percentage. Save. The updated rate will apply to all future invoices for that product. For large catalogs with hundreds of products, use the CSV bulk update feature — export your product list, change the GST rate column in Excel for affected items, and re-import. myBillPlease will match products by HSN code or SKU and update the rates. Verify by creating a test invoice after updating. If you use our free GST calculator at mybillplease.com/tools/gst-calculator, it shows calculations at any rate you enter.
What items are now at 40% GST?: The new 40% GST slab applies exclusively to luxury and sin goods. This includes all tobacco products like cigarettes, cigars, chewing tobacco, pan masala, and gutka. Aerated and sugary beverages including carbonated drinks, energy drinks, and sweetened drinks also fall under 40%. Luxury vehicles above Rs 20 lakh, sports bikes above 350cc, yachts, private jets, and premium cosmetics are in this bracket. High-end watches above Rs 1 lakh and designer goods also attract 40% GST. This rate is higher than the old 28% that applied to these categories, reflecting the government's policy of heavily taxing harmful and luxury consumption.
Do I need to change my HSN codes after GST 2.0?: In most cases, no. HSN codes classify products by type, not by GST rate. The same HSN code applies to a product regardless of which GST slab it falls under. However, some items have been reclassified under different HSN headings as part of the reform. For example, certain packaged food items that moved from 12% to 5% may have updated sub-classifications. The safest approach is to verify your HSN codes using the official CBIC notifications or our HSN code directory at mybillplease.com/hsn. Using the wrong HSN code can attract a penalty of Rs 50 per invoice up to a maximum of Rs 25,000 per financial year under Section 125 of the CGST Act.