New GST Rates After GST 2.0: The 5%, 18% and 40% Slabs for Shop Owners
Since 22 September 2025, India has three main GST slabs: 5%, 18% and 40%, plus 0% for essentials. Here is what moved where, a rate list for common items with HSN codes, and how to update your bills.
BillBabu Team
BillBabu App Team
In short
- From 22 September 2025 (GST 2.0), the main GST slabs are 0%, 5%, 18% and 40%.
- The 28 percent slab is gone, and 12 percent is left only for a few items such as bricks and roofing tiles. Most goods moved down to 5% or 18%.
- 40% is a special slab for a short list of luxury and "sin" goods, such as sugary and aerated drinks and big cars.
- A few items have special rates, such as 3% on gold and silver. The rate for your item depends on its HSN code.
Rates checked on 4 October 2026, under the GST 2.0 rates in force since 22 September 2025. Rates can depend on the exact item, its price or its packing, so confirm your item in the CBIC rate notification or with your CA.
The GST slabs now
The GST Council agreed the new structure on 3 September 2025, and it applies to supplies from 22 September 2025. For a shop owner, it means fewer rates to remember and lower tax on many everyday goods.
| Slab | What it covers | Examples |
|---|---|---|
| 0% (nil) | Basic food and essentials | Loose rice, fresh milk, exercise books |
| 5% | Daily-use goods and many packaged foods | Ghee, butter, biscuits, namkeen, soap, shampoo, toothpaste, most medicines |
| 18% | The standard rate for most goods and services | Cement, mobile phones, laptops, air conditioners, most professional services |
| 40% | Luxury and "sin" goods | Aerated and sugary drinks, large cars, motorcycles above 350 cc, pan masala and tobacco products |
| Special rates | A few items | 3% on gold, silver and jewellery; 0.25% on rough diamonds and precious stones; 1.5% on cut and polished diamonds; 12 percent on bricks and roofing tiles |
Pan masala and tobacco products have been at 40% since 1 February 2026 (biris at 18%). They also carry a separate cess or excise duty, which is outside GST and not shown as a GST line on the bill.
What changed on 22 September 2025
- The 12 percent slab was cut to a handful of items, mainly bricks, fly-ash blocks and roofing tiles. Most of its goods moved to 5%: butter, ghee, cheese, namkeen, many packaged foods and most medicines.
- The 28 percent slab is gone. Most of its goods moved to 18%: cement, air conditioners, televisions, and small cars and two-wheelers. Pan masala and tobacco stayed on the old rate plus a cess until 31 January 2026, and moved to 40% on 1 February 2026.
- Some items came down from 18% to 5%: soap, shampoo, hair oil, toothpaste and biscuits.
- Some items became nil-rated, such as UHT milk, paneer, Indian breads like roti and paratha, and exercise books.
- A new 40% slab took in the luxury and sin goods that used to pay the top rate plus a compensation cess. That cess has now ended on all goods.
Most shops saw their rates fall, not rise. But the change only helps you if your bills use the new rate for each item.
GST rates for common items, with HSN codes
These are the rates on our free HSN code finder, checked on 4 October 2026. The HSN code shown is the 4-digit heading; your exact item may have a longer code.
| HSN | Item | GST |
|---|---|---|
| 1006 | Rice, loose (not pre-packed and labelled) | 0% |
| 0401 | Milk (fresh, pasteurised or UHT) | 0% |
| 4820 | Exercise books and notebooks | 0% |
| 0405 | Butter, ghee and dairy spreads | 5% |
| 1905 | Biscuits, cakes and pastries | 5% |
| 2106 | Namkeen, bhujia and mixture | 5% |
| 3305 | Shampoo and hair oil | 5% |
| 3306 | Toothpaste and tooth powder | 5% |
| 3401 | Toilet soap bars | 5% |
| 3004 | Medicines packed for retail sale | 5% (some life-saving drugs are nil) |
| 6109 | T-shirts and vests | 5% up to ₹2,500 a piece, 18% above |
| 6403 | Leather footwear | 5% up to ₹2,500 a pair, 18% above |
| 2523 | Cement | 18% |
| 8415 | Air conditioners | 18% |
| 8471 | Computers and laptops | 18% |
| 8517 | Mobile phones | 18% |
| 8504 | Mobile chargers and adapters | 18% |
| 8708 | Motor vehicle parts | 18% |
| 2202 | Aerated drinks and drinks with added sugar | 40% |
Clothes and footwear: the ₹2,500 rule
For clothing and footwear, the rate depends on the price of each piece or pair. Up to ₹2,500 it is 5%. Above ₹2,500 it is 18%. The price that counts is the sale value of that one piece, not the bill total.
So a shirt sold for ₹2,000 carries 5% GST (₹100), while a jacket sold for ₹3,000 carries 18% GST (₹540). If the same customer buys both, the bill has two rates: ₹640 of GST on ₹5,000 of clothes.
Worked example: one kirana bill with mixed rates
A customer at a kirana store in Lucknow buys the items below. The amounts are before GST, and it is a sale inside Uttar Pradesh, so each rate splits into CGST and SGST.
| Item | Taxable value | GST rate | CGST | SGST |
|---|---|---|---|---|
| Loose rice, 10 kg | ₹500 | 0% | ₹0 | ₹0 |
| Toothpaste | ₹200 | 5% | ₹5 | ₹5 |
| Biscuits | ₹300 | 5% | ₹7.50 | ₹7.50 |
| Cold drinks | ₹250 | 40% | ₹50 | ₹50 |
| Total | ₹1,250 | ₹62.50 | ₹62.50 |
The GST on this bill is ₹125, and the customer pays ₹1,375. Notice that the cold drinks alone carry ₹100 of it. That is why each item needs its own rate: one wrong rate changes the whole bill.
Services
Most services, such as repairs, IT work, advertising, coaching and legal or accounting work, are at 18%. A few are lower. A standalone restaurant charges 5% (without input tax credit), and hotel rooms up to ₹7,500 a night are also at 5%. Freelancers and other service providers can find their codes in our guide to the GST invoice format for service providers.
How to find the right rate for your item
- Find the HSN code (for goods) or SAC code (for services). Our guide on how to find an HSN code walks through it.
- Look the code up in the HSN code finder or the GST portal's free HSN/SAC search.
- For anything with a condition (price per piece, packing, labelling), read the CBIC rate notification or ask your CA.
- Check your supplier's latest bill. If your supplier charges a different rate for the same item, ask why before you copy it.
Update your bills, not just your price tags
If you use billing software, open every product and check its GST rate against the new slabs. Most billing apps, BillBabu included, save the rate on the product, so an old rate keeps coming back on every new bill until you change it. Bills issued before 22 September 2025 stay as they are. Do not reissue them at the new rates.
Once the rate is right, the tax split follows from the place of supply. See which of CGST, SGST and IGST goes on your bill, or try any amount in the free GST calculator.
Frequently asked questions
When did the new GST rates start?
On 22 September 2025. The GST Council approved them at its meeting on 3 September 2025.
Is there still a 12 percent or 28 percent GST slab?
There is no 28 percent rate any more. 12 percent is left only for a short list, mainly bricks, fly-ash blocks and roofing tiles, and some construction services. Almost everything else that was in those slabs moved to 5% or 18%, and luxury and sin goods moved to 40%.
Which goods are at 40% GST?
Mainly aerated and sugary drinks, large cars, motorcycles above 350 cc and a few other luxury goods, plus pan masala, cigarettes and other tobacco products since 1 February 2026. Check your exact item in the rate notification.
Do I need to change invoices made before 22 September 2025?
No. Those invoices keep the rate that applied when they were issued. If a single sale straddles the date (for example, an advance before and the delivery after), ask your CA which rate applies.
Is GST on clothes 5% or 18%?
5% for a piece sold at up to ₹2,500, and 18% above that. The same ₹2,500 limit applies per pair of footwear.
Make GST bills with the right rate on every line. BillBabu is a GST billing app for Android, with a web app at app.billbabu.com. Make GST invoices and estimates, share them as PDFs and see who still owes you money. Every account starts with a 14-day free trial, and you do not need a card. Get BillBabu on Google Play or see plans and prices.
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