Summary: The new GST rate structure in India broadly centers on 5% and 18%, with special rates for certain goods and a 40% rate for specified luxury and demerit items. This guide covers the revised slabs, applicable date, old vs new rates, and current GST rates for common goods and services.
Quick Overview
- The revised GST rate structure took effect from 22 September 2025
- The main GST slabs now broadly center on the 5% merit rate and 18% standard rate
- A 40% rate applies to specified luxury and demerit goods, while special rates continue for certain categories
- Gold continues to attract a special 3% GST rate, while mobiles generally attract 18%
- ACs, refrigerators and eligible two-wheelers up to 350cc now attract 18% GST
- Always verify the HSN or SAC classification and effective date before applying a GST rate
You may have noticed a price drop on something you were about to buy. Or maybe you came across a headline about GST changes and want to know what actually applies now. Either way, chances are that the cost of the goods or services you regularly consume have changed.
This guide walks through the current slabs, what changed from the earlier structure, and the specific rates for items people ask about most: gold, mobiles, appliances, paint, and two-wheelers.
What Are GST Rates and GST Slabs?
A GST rate is the percentage of tax charged on a taxable supply. A GST slab is the category that groups goods or services attracting the same rate. For example, if a restaurant meal falls under the 5% GST slab, the GST rate charged on your bill will be 5%. However, not everything is taxed the same way.
Essentials and commonly used items are generally placed in lower slabs, while goods with standard demand sit in the mid-range rate. A narrow set of luxury or demerit items attracts a much higher rate, and some supplies are nil-rated or exempt altogether.
The different slabs exist for a reason. Taxing a bag of rice at the same rate as a premium car would hurt lower-income households far more than higher-income ones, so essentials are taxed lightly and non-essential or harmful goods are taxed heavily.
Here’s what a slab means in practice. On a product worth ₹1,000:
- At 5% GST, the tax is ₹50, so the buyer pays ₹1,050
- At 18% GST, the tax is ₹180, so the buyer pays ₹1,180
How are GST Rates Applied to Goods and Services?
The GST rate you pay depends on how the product or service is officially classified under the GST system.
Goods are classified using Harmonized System of Nomenclature (HSN) codes, while services are classified using Services Accounting Codes (SAC). The applicable HSN or SAC code determines the GST rate. As a result, two visually similar products can attract different GST rates.
- SAC Codes: Every service code is exactly 6 digits and always begins with the prefix 99.
- HSN Codes: Goods use a multi-tiered system based on company turnover. Companies making under ₹5 crore use 4 digits, those above ₹5 crore use 6 digits, and international traders must use 8 digits.
Some products qualify for a different GST rate only if they meet specific conditions, such as their packaging, intended use, or buyer category.
For example, the same product can attract different GST rates depending on the conditions attached to it:
- Loose, unbranded staple foods are generally exempt from GST (0%), while the identical product becomes taxable once it is pre-packaged and labeled
- General equipment components are taxed at the standard rate, but may qualify for lower merit rates if structured as an integrated part of a farm machinery or green-energy system
This classification system also explains why the 2025 rate overhaul happened. Under the old structure, several sectors faced an inverted duty structure, where raw materials were taxed at a higher rate than the finished product built from them.
Man-made textile fibers are a clear example, where the input tax exceeded the tax on the final garment, leaving manufacturers with blocked input tax credit and higher effective costs. The September 2025 GST rationalization is a move towards correcting these mismatches.
What are the New GST Rates in India?
The revised structure became effective on 22 September 2025, following the GST Council’s 56th meeting recommendations. Some items still depend on specific notifications, so checking the correct classification is still important.
| GST Rate | Broad Treatment |
| 0% / exempt | Specified nil-rated or exempt supplies |
| 3% | Gold and silver-related special category |
| 5% | Merit rate |
| 18% | Standard rate |
| 40% | Luxury / demerit / sin goods |
The 40% bracket only impacts a narrow band of goods: high-end cars and SUVs, yachts, private aircraft, carbonated and caffeinated energy drinks, plus anything tied to online gaming, casinos, betting, or lotteries.
Tobacco followed its own timeline. Cigarettes, pan masala, gutkha, and chewing tobacco initially stayed on the old 28% plus compensation cess setup after the September 2025 reform, but moved to 40% GST from 1 February 2026, once the compensation cess was phased out. Bidis moved to 18% instead. New levies outside GST, including an additional excise duty on tobacco and a Health and National Security Cess on pan masala, now apply in addition to these rates.
Gold and silver attract a separate GST rate of 3% on the metal itself, unrelated to the main slabs. When you buy actual jewelry instead of bullion, the making charges get taxed separately at 5%.
Old vs New GST Slabs: What Changed?
The earlier system ran on four working slabs, 5%, 12%, 18%, and 28%, alongside a compensation cess on select goods. That four-tier setup created recurring classification disputes because a product could attract either a 12% or 18% GST rate depending on how an assessing officer interpreted its packaging or composition. The new structure removes two of those tiers entirely. Most items that were taxed at 12% moved to 5%, while most goods earlier taxed at 28% moved to 18%, with only a small, defined set of goods pushed up to 40%.
| Earlier Major Slab | Revised Treatment | Impact / Key Items Affected |
| 0% (Exempt) | Retained & Expanded | Now includes life & health insurance, basic education items (pencils, erasers), and fresh foods |
| 5% | Retained as Merit Rate | Covers common-use goods, MSME products (handicrafts, leather), and packaged foods (butter, ghee) |
| 12% | Abolished / Removed | Items moved. Farm machinery and textiles dropped to 5%; others moved to 18% |
| 18% | Retained as Principal Standard Rate | The primary slab for the vast majority of standard goods, services, and software |
| 28% | Abolished / Removed | 90% of items dropped to 18% (cement, TVs, small cars, two-wheelers under 350cc) |
| – | 40% Introduced | Sin & Luxury rate consolidating the old 28% + Cess (luxury cars, aerated drinks, online gaming) |
New GST Rates in India: Item-Wise List
That’s the broad shift. Here’s what it actually means for a few items people check most often.
Gold falls outside the standard 5%, 18%, and 40% GST slabs and continues to attract a separate 3% rate, which is why it doesn’t show up cheaper or costlier under this reform, the way electronics did. Mobile phones also deserve separate mention. Despite industry requests to bring them down to 5%, the Council left the rate at 18%, so there’s no relief there, even though appliances in the same shopping trip may now cost less.
Here is a general item-wise list:
| Product / Category | Current GST Rate | Note |
| Gold | 3% | Special rate on the gold value; a separate 5% applies to making charges |
| Mobile phones | 18% | Unchanged in the 2025 reform |
| Air conditioners | 18% | Down from 28% |
| Refrigerators | 18% | Down from 28% |
| Paint | 18% | Down from 28% |
| Two-wheelers up to 350cc | 18% | Revised from higher pre-reform treatment |
| Luxury/demerit goods | 40% | Specified categories only |
What are the GST Rates on Services?
Services follow the same slab logic as goods, but eligibility conditions show up more often. A restaurant’s rate, for instance, can shift based on whether it operates inside a specified category of hotel or as a standalone establishment. Likewise, hotel accommodation itself is priced by room tariff bracket rather than a flat rate across the board. When in doubt on a service, check the specific condition attached to that SAC code rather than assuming the general 18% default applies.
| Service | Applicable GST Rate / Treatment |
| Professional services | Usually standard taxable treatment |
| Telecom services | Standard taxable treatment |
| Banking / financial services | Standard taxable treatment |
| Restaurant services | Depends on category and conditions |
| Hotel accommodation | Depends on applicable classification |
| Transport services | Depends on type and category |
How to Check the Correct GST Rate
- Identify the exact product or service, not just its general category
- Find its HSN code (goods) or SAC code (services)
- Look up the current rate tied to that code
- Check whether an exemption or special condition changes the rate for your specific case
- Confirm the effective date, especially for anything changed in or after September 2025
- Cross-check against official GST notifications or the CBIC rate list rather than an older article or a competitor’s invoice
Conclusion
After the 2025 GST reform, two GST slabs: 5% and 18%, cover most goods and services in India, making the tax structure simpler. However, businesses must still classify their products correctly. A product’s GST liability is determined by its HSN code, not its general category. Incorrect classification can lead to compliance issues and may also affect a business’s eligibility to claim Input Tax Credit (ITC), not just the GST charged on the invoice.
For everyday buyers, the practical takeaway is narrower. Appliances and paint got cheaper, mobiles didn’t move, and gold still runs on its own 3% track separate from everything else. At the same time, the system continues to balance different policy goals. While essentials like insurance and basic foods were carved out to a 0% tax-free tier, a heavy 40% penalty slab was introduced to isolate luxury and demerit goods from the standard market.
