Under the GST 2.0 reform effective 22 September 2025, India moved to a two-slab structure — 5% and 18%. The old 12% and 28% slabs were removed, and a new 40% rate applies to demerit and luxury goods (pan masala, tobacco, aerated drinks, luxury cars). Essentials and many food, medicine and insurance items are nil-rated (0%). Gold and silver stay at a special 3%.
The GST Council's 56th meeting rationalised four slabs (5/12/18/28%) into two (5% and 18%) plus a 40% demerit rate. Most items in the old 12% slab moved to 5%, and most 28% items moved to 18% — with sin/luxury goods pushed to 40%. Individual life and health insurance premiums became nil-rated.
GST Rate Slabs — 5%, 18% & 40%
The main GST slabs after the 22 September 2025 reform, with common examples. Use our GST calculator to work out tax on any amount, and the HSN/SAC code finder to confirm an item's rate.
| Slab | Category | Common examples |
|---|---|---|
| 0% | Nil-rated / exempt | Unbranded food grains, fresh milk, roti/paratha, paneer, life & health insurance (individual), education, healthcare |
| 5% | Essentials & mass use | Packaged food, footwear & apparel, medicines, small cars, cement inputs, budget hotel rooms (≤₹7,500), economy air & rail |
| 18% | Standard goods & services | Most goods & services: IT & software, telecom, financial services, consumer electronics (TV, AC, fridge), branded garments, restaurants, professional fees |
| 40% | Demerit / luxury (sin) | Pan masala, tobacco & cigarettes, aerated / sugary drinks, luxury cars & SUVs, other notified sin goods |
The 12% and 28% slabs were abolished on 22 Sep 2025. Certain sin goods also carry compensation cess in addition to the 40% rate.
Nil-Rated & Exempt Goods and Services
Several essential goods and services carry 0% GST (nil-rated) or are exempt. GST 2.0 widened this list — notably making individual life and health insurance policies tax-free from 22 September 2025.
| Category | Examples |
|---|---|
| Food staples | Unbranded wheat, rice, atta, pulses, fresh vegetables & fruits, unpacked milk, curd, roti, paratha, paneer |
| Insurance | All individual life insurance and individual/family-floater health insurance policies (group policies stay at 18%) |
| Healthcare | Hospital & clinic services, blood, most vaccines and notified life-saving drugs |
| Education | Services by educational institutions up to higher secondary, certain notebooks & exercise books |
| Others | Salt, books, printed newspapers, judicial stamps, khadi & handloom, agricultural services |
The difference between nil-rated and exempt supplies affects Input Tax Credit. ITC is generally not available on inputs used to make exempt or nil-rated outward supplies, so a supplier of exempt goods cannot recover the GST paid on purchases.
Not sure whether your product is 5%, 18% or exempt?
Get a rate classification check →Gold, Diamonds & Special GST Rates
A few items sit outside the 5%/18%/40% structure at special notified rates, largely unchanged by GST 2.0.
| Rate | Applicable to | ITC / cess |
|---|---|---|
| 0.25% | Rough (uncut, unpolished) diamonds | Normal ITC |
| 1.5% | Cut & polished diamonds | Normal ITC |
| 3% | Gold, silver, platinum & their jewellery | Making charges taxed at 5% |
| 40% + cess | Pan masala, tobacco, aerated drinks, luxury cars | Compensation cess in addition to GST |
Special rates are set by separate notifications; verify the current rate before invoicing high-value items.
GST on Common Services
| Service | GST rate |
|---|---|
| IT, software, telecom, banking & financial | 18% |
| Legal, CA & consulting services | 18% |
| Restaurants (standalone, without ITC) | 5% |
| Hotel room, tariff up to ₹7,500 / day | 5% |
| Hotel room, tariff above ₹7,500 / day | 18% |
| Economy air & rail travel | 5% |
| Individual life & health insurance | Nil |
| Goods transport by road (GTA, without ITC) | 5% |
Hotel-room and restaurant rates were revised under GST 2.0; rooms up to ₹7,500 attract 5% (no ITC).
GST Composition Scheme Rates
The composition scheme lets small businesses (turnover up to ₹1.5 crore; ₹75 lakh for special-category states, or ₹50 lakh for eligible service providers) pay a flat GST rate without charging tax or claiming ITC.
| Business type | CGST | SGST | Total |
|---|---|---|---|
| Manufacturers | 0.5% | 0.5% | 1% |
| Traders (goods) | 0.5% | 0.5% | 1% |
| Restaurants (no alcohol) | 2.5% | 2.5% | 5% |
| Eligible service providers | 3% | 3% | 6% |
Composition dealers file quarterly CMP-08 and an annual GSTR-4; they cannot make inter-state sales or claim ITC.
On certain notified supplies (e.g. GTA, legal services, residential rent to a business), the recipient pays GST under reverse charge — even a composition dealer must pay RCM at the applicable rate, and cannot use it as ITC.
Want help picking the right scheme and rates for your business?
Talk to a GST Expert →GST Rates — Frequently Asked Questions
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