Understanding GST Rates in India: A Complete List

Published on: July 29, 2026

India's GST rate structure underwent its most significant redesign since 2017 when the 56th GST Council recommendations took effect on 22 September 2025. The four-slab architecture of 5, 12, 18, and 28 percent gave way to a two-rate structure of 5 percent and 18 percent, supported by a nil rate for essentials and a 40 percent demerit rate for sin and luxury consumption. Compensation cess was simultaneously withdrawn on most goods.

The scale of the exercise was substantial. Hundreds of tariff lines were repositioned, individual life and health insurance policies were exempted, most medicines moved to 5 percent, cement and large appliances came down to 18 percent, and a narrow basket of tobacco, sugary drinks, luxury vehicles, and gaming services moved to 40 percent. Government estimates placed the consumption impact in the range of a Rs 2 lakh crore annual stimulus.

For finance and tax teams, the reform converted a settled classification exercise into an active compliance risk. Rate masters, contract price clauses, ERP tax codes, e-invoicing schemas, and MRP labelling all had to change within a compressed window. This guide consolidates the current rate landscape, explains how to classify correctly, and sets out the controls that keep rate application defensible.

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What Are the GST Rate Slabs in India Today?

GST currently operates on a nil rate, 5 percent merit rate, 18 percent standard rate, and 40 percent demerit rate, with a small set of special rates for precious stones, jewellery, and bricks. The 12 percent and 28 percent slabs stand discontinued from 22 September 2025, and compensation cess has been withdrawn on most goods.

Tobacco products were held at pre-reform rates with compensation cess for a transition window until the Centre discharged its cess-linked loan obligations, after which they moved into the 40 percent bracket. Because the transition was staggered, teams must confirm the effective date applicable to each tariff line rather than assuming a single cut-off.

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Why Did India Move to a Two-Slab Structure?

The rationalisation addressed three long-standing weaknesses in the original design: classification disputes driven by fine distinctions between 12 and 18 percent, inverted duty structures where inputs were taxed higher than outputs, and the regressive burden on mass-consumption goods. Collapsing the middle slabs reduced the number of contestable boundaries.

The reform also delivered structural changes beyond rates:

• Withdrawal of compensation cess on most goods, simplifying invoice-level tax computation and valuation
• Correction of inverted structures in textiles, fertilisers, and renewable energy, reducing accumulated credit and refund pressure
• Exemption of individual life and health insurance, which removed output tax but also blocked credit for insurers on related inputs
• Uniform rates within product families — auto components at a single 18 percent, for example, ending part-by-part disputes

Rate changes were notified under Section 9 of the CGST Act, 2017 and Section 5 of the IGST Act, 2017, through amendments to the rate notifications that flow from Notification No. 1/2017-Central Tax (Rate) for goods and Notification No. 11/2017-Central Tax (Rate) for services.

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Which Goods Fall in Each Slab?

The merit rate of 5 percent now carries the bulk of household consumption, while 18 percent operates as the default for anything not specifically notified elsewhere. Reading the notification entry rather than a summary table is essential, because several categories are split by value thresholds or packaging conditions.

Nil or exempt goods

• Fresh fruit and vegetables, unbranded cereals and pulses, fresh milk and curd
• All Indian breads including roti, chapati, paratha, khakhra, and pizza bread
• UHT milk and pre-packaged, labelled paneer or chena
• Specified life-saving drugs notified at nil rate
• Education stationery such as maps, charts, globes, pencils, and erasers

5 percent goods

• Packaged and processed foods — namkeen, sauces, pasta, cornflakes, biscuits, chocolates, dry fruits, butter, ghee, and cheese
• Personal care staples — hair oil, soap, shampoo, toothpaste, toothbrushes, shaving cream, talcum powder
• Medicines and most medical devices, diagnostic kits, and reagents
• Footwear and readymade garments with sale value up to Rs 2,500 per piece
• Bicycles, kitchenware and tableware, agricultural machinery, tractors, fertilisers, and bio-pesticides
• Renewable energy devices and parts

18 percent goods

• Air conditioners, televisions of all screen sizes, refrigerators, washing machines, and dishwashers
• Cement, previously at 28 percent, a material input cost reduction for construction
• Small cars within the notified engine capacity and length limits, and motorcycles up to 350cc
• Buses, trucks, ambulances, and auto components at a uniform rate
• Footwear and apparel above Rs 2,500 per piece, and most industrial and intermediate goods

40 percent goods

• Pan masala, gutkha, cigarettes, chewing tobacco, zarda, and unmanufactured tobacco
• Aerated, carbonated, caffeinated, and other sugary non-alcoholic beverages
• Luxury motor vehicles exceeding notified engine capacity or length, and motorcycles above 350cc
• Yachts, private aircraft, and specified firearms

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How Are Services Taxed?

Most services attract 18 percent with full input tax credit, but several service categories carry concessional 5 percent rates conditional on forgoing credit, and a few are exempt outright. The credit condition is as commercially significant as the rate itself, since a lower headline rate with blocked credit can increase effective cost for B2B customers.

Leasing and renting of goods generally follows the rate applicable to the supply of the underlying goods, which means rate changes on goods automatically reset rental rates for equipment lessors.

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Who Is Affected by Rate Changes, and How?

Every registered person is affected, but exposure concentrates in businesses with long-dated contracts, MRP-labelled inventory, credit-blocked output rates, and complex product catalogues. Rate changes flow through pricing, transition stock, credit eligibility, and system configuration simultaneously.

• Retail and FMCG: MRP re-labelling, trade communications, and revised price lists under legal metrology requirements
• Insurance: exemption of individual policies removes output tax but blocks input credit, requiring Rule 42 and 43 apportionment reviews
• Automotive and cement: significant reductions demand dealer margin and discount renegotiation, plus credit note handling on channel stock
• Hospitality and wellness: concessional rates without credit require re-costing since input GST becomes a cost
• Contract-heavy sectors: price-variation and tax-change clauses determine who absorbs the difference on supplies straddling the effective date

The time of supply provisions in Sections 12 to 14 of the CGST Act govern which rate applies where invoice, payment, and supply fall on different sides of the change date. Section 14 specifically deals with rate changes and is the operative provision for transition invoices.

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How Do You Determine the Correct Rate for Your Product?

Rate determination is a classification exercise, not a lookup. Identify the correct HSN code for goods or SAC code for services using the Customs Tariff schedule and the General Rules of Interpretation, then apply the notified rate entry against that classification, including any conditions or value thresholds attached to it.

A defensible classification process involves:

• Documenting the product's essential character, composition, and predominant use, supported by technical specifications
• Applying the General Rules of Interpretation in sequence, including the specific-over-general and essential-character rules
• Checking whether the entry has a condition — packaging, labelling, value threshold, or credit restriction
• Reviewing CBIC circulars, FAQs, and advance rulings on similar products, while recognising that rulings bind only the applicant
• Seeking an advance ruling under Section 97 where ambiguity is material and recurring

HSN reporting is itself a compliance obligation. Reporting at four or six digits based on aggregate turnover is mandatory in invoices and in Table 12 of GSTR-1, which the portal now validates against a dropdown-driven master with B2B and B2C bifurcation.

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What Are the Consequences of Applying the Wrong Rate?

Under-charging creates a tax, interest, and penalty exposure on the supplier, since the liability is statutory and rarely recoverable from customers after the fact. Over-charging creates a refund and unjust-enrichment problem, and can invite customer disputes and credit denials on the excess.

• Short payment: demand under Section 73 for non-fraudulent cases or Section 74 where fraud or wilful misstatement is alleged, with Section 74A governing periods from FY 2024-25
• Interest: 18 percent under Section 50, computed from the due date of the tax period
• Penalty: 10 percent of tax or Rs 10,000, whichever is higher, in non-fraud cases; up to 100 percent of tax in fraud cases
• Incorrect invoicing: penalty under Section 122(1) for issuing an incorrect or false invoice
• Customer-side impact: excess tax charged is not valid credit for the recipient, who may recover the loss contractually

Anti-profiteering under Section 171 has been wound down for new applications, but businesses should still retain documentation showing how rate reductions were passed on, particularly in consumer-facing sectors.

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Practical Recommendations

Rate governance should be a standing control, not a project run once per Council meeting. The following measures materially reduce classification risk.

• Maintain a versioned rate master mapping each SKU and service line to HSN or SAC, rate, notification reference, effective date, and credit condition. Retain history for audit.
• Assign classification ownership to a named person with authority to require technical inputs from product teams, and record the reasoning for every non-obvious classification.
• Build a transition protocol for rate changes covering time of supply analysis under Section 14, credit notes on channel stock, MRP re-labelling, and customer communication.
• Review contract tax clauses so that statutory rate changes and cess withdrawals are explicitly allocated between parties.
• Reconcile rates across systems — ERP, billing, e-commerce catalogues, and the e-invoice schema must agree, since a mismatch surfaces at the invoice registration portal described in E-invoicing under GST: Everything You Need to Know.
• Test the credit consequence before adopting a concessional rate. Where output is exempt or 5 percent without credit, model the apportionment impact using the framework in Input Tax Credit (ITC): Rules and Best Practices.
• Validate HSN reporting monthly against Table 12 requirements before filing, as covered in GSTR-1 vs GSTR-3B: Key Differences Explained.

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References

1. GST Portal — Rate notifications and search — Official rate schedules and HSN search utility
2. CBIC — Central Tax (Rate) notifications — Notifications amending the goods and services rate schedules
3. CBIC-GST — Rate schedules and circulars — Consolidated notification text and clarifications
4. GST Council — 56th meeting recommendations — Basis for the two-slab rationalisation
5. Press Information Bureau — GST reform releases — Official announcements on rate changes and consumption impact
6. ClearTax — GST rate finder and slab guide — Practitioner-oriented rate lookup
7. TaxGuru — Rate rationalisation analysis — Sector-level commentary on the 2025 changes
8. Tally Solutions — Rate change implementation guidance — Master data and system update steps
9. CAclubindia — Classification and HSN discussions — Practitioner experience on disputed entries