GST rates in India changed significantly with GST 2.0, the rate‑rationalisation reform that took effect on 22 September 2025. If you run a small business, this guide explains the current GST slabs in 2026, what changed, and how to find the right rate for your products — in plain language.
What is GST 2.0?
GST 2.0 (the “next‑generation” GST reform) simplified a system that had grown complicated. Instead of five rate buckets, India now runs on two main slabs — 5% and 18% — with a 0% nil rate for essentials and a 40% de‑merit rate for luxury and sin goods. The old 12% and 28% slabs were removed, with their items redistributed to the remaining rates.
The goals were simple: fewer disputes over which slab an item belongs to, cheaper essentials, and easier compliance for small businesses.
The current GST slabs (2026)
Here are the GST rates that apply today:
| GST rate | Applies to (broadly) |
|---|---|
| 0% (Nil) | Everyday essentials — fresh produce, unbranded food grains, milk; and life & health insurance premiums |
| 5% | Mass‑use and essential items — packaged food staples, common household goods, many medicines |
| 18% | The standard rate — most goods and services, electronics, appliances, and professional services |
| 40% | Luxury and “sin” goods — tobacco, pan masala, aerated/sugary drinks, luxury cars |
In addition, two special rates continue:
| Special rate | Applies to |
|---|---|
| 3% | Gold, silver and jewellery |
| 0.25% | Rough diamonds |
Note: Slabs are assigned per item using its HSN code, and classifications can be updated by government notification. Always confirm the current rate for your specific product before billing.
What changed under GST 2.0
The reform collapsed five slabs into a cleaner structure. At a high level:
| Before GST 2.0 | After GST 2.0 |
|---|---|
| 0%, 5%, 12%, 18%, 28% | 0%, 5%, 18%, 40% |
| 12% slab | Most items moved to 5% |
| 28% slab | Most items moved to 18% |
| Luxury / sin goods | Moved to the new 40% rate |
For most small businesses, this means many everyday goods became cheaper (12% → 5%, 28% → 18%), while only a small set of luxury and sin items sit at the higher 40% rate.
GST rate examples by category
To make it concrete, here’s roughly where common categories fall today:
| Category | Typical GST rate |
|---|---|
| Fresh vegetables, fruits, milk | 0% |
| Packaged staples, most medicines | 5% |
| Apparel and footwear (mass segment) | 5% |
| Mobile phones, electronics, appliances | 18% |
| Restaurant and professional services | 5% – 18% |
| Cement, most building materials | 18% |
| Tobacco, pan masala, aerated drinks | 40% |
| Gold and jewellery | 3% |
These are general examples — the exact rate depends on the item’s HSN classification, so verify before you invoice.
How GST 2.0 affects small businesses
- Cheaper inputs and goods: many items dropped from 12% to 5% or 28% to 18%, lowering prices for you and your customers.
- Simpler compliance: fewer slabs means fewer classification disputes and cleaner GSTR filings.
- Clearer pricing: with two main rates, quoting the right tax is far easier at the counter.
- Watch the 40% items: if you deal in luxury or sin goods, make sure you’re billing the higher rate correctly.
How to find the GST rate for your product
The reliable way is to work from your product’s HSN code:
- Find the HSN code — use the free HSN Code Finder (and see What Is an HSN Code? if you’re new to it).
- Check the tax — the GST Calculator works out CGST/SGST or IGST on any amount for any slab.
Inside KhataBuddy, the correct HSN code and GST rate are applied automatically as you add items — so every invoice stays compliant with the latest slabs without you looking anything up. Try KhataBuddy free and bill with the right GST rate, every time.