The GST Council's "next-generation" reform is the biggest change to indirect tax since GST launched in 2017. From 22 September 2025, the 12% and 28% slabs were abolished. Almost everything now sits at 5% or 18%, with a 40% demerit rate for tobacco, pan masala, aerated drinks, large cars and online money gaming. A year in, searches for "new GST rate list" are still climbing every month because rate cards, POS systems and old invoice templates are still catching up.
The new structure at a glance
| Slab | What it covers now |
|---|---|
| Nil | Milk, paneer, bread, roti, exercise books, life-saving drugs, individual life & health insurance |
| 5% | Most packaged food, ghee, butter, dry fruits, biscuits, chocolates, soap, shampoo, toothpaste, garments & footwear ≤ ₹2,500, medicines, medical devices, tractors, cement blocks, salons, gyms, hotels ≤ ₹7,500/night |
| 18% | Cement, TVs, ACs, washing machines, dishwashers, small cars, motorcycles ≤ 350cc, electronics, garments > ₹2,500, most services |
| 40% | Tobacco, pan masala, aerated & caffeinated drinks, cars above the small-car limit, motorcycles > 350cc, casinos and online money gaming |
Rates on gold and silver (3%) and rough diamonds (0.25%) were untouched.
Who gained the most
- Kirana and FMCG retail. Soap, shampoo, toothpaste, hair oil, biscuits, namkeen, chocolates and ice cream dropped from 12–18% to 5%. Consumer prices fell 8–12% on many SKUs, and companies reprinted MRPs through October and November 2025.
- Consumer durables. TVs of every size, ACs, dishwashers and refrigerators moved from 28% to 18%. Diwali 2025 was the strongest appliance season in five years.
- Construction. Cement fell from 28% to 18%, which cut the cost of a typical 1,000 sq ft build by roughly ₹40,000–60,000.
- Insurance buyers. Individual life and health premiums became fully exempt — no 18% on top of your family floater.
Who needs to be careful
- Composition dealers. Your rate (1%, 5% for restaurants, 6% for services) did not change, but your input costs did. If most of your purchases fell to 5%, the composition trade-off is now slightly less attractive. Run the numbers with the GST calculator's composition comparison.
- Anyone with stock bought at 12% or 28%. Input tax credit on that stock remains valid — you claim what you actually paid. But you must sell at the new rate. Selling at the old rate is over-collection and attracts anti-profiteering scrutiny.
- Service businesses at 12%. Job work on many manufacturing inputs, and a few construction services, moved up to 18%. Check your SAC.
Five things to fix in your billing this week
- Update the rate on every product master. In Tally, Vyapar, Zoho, or even a spreadsheet — the HSN stays the same, only the rate changes. Use the HSN/SAC finder to spot-check anything you are unsure about.
- Reprint price tags and menus. MRP is inclusive of all taxes; if your supplier reprinted MRP you must sell at the new MRP. The price tag generator makes a sheet in a minute.
- Check your invoice template. Templates that hard-code "12%" or "28%" in a dropdown will let staff pick a dead rate. The GST invoice generator still offers 12% and 28% for back-dated bills but defaults to the live slabs.
- Reconcile September 2025 carefully. That month had both rate structures. Supplies made on or before 21 September carry the old rate even if you invoiced later; the time of supply rules decide.
- Tell customers. A small "Prices reduced — GST 2.0" note at the counter converts curiosity into sales and pre-empts arguments about old stock.
What has not changed
GST registration threshold (₹40 lakh for goods, ₹20 lakh for services, lower in special-category states), return due dates, e-invoicing thresholds, the reverse-charge list and the composition scheme limits are all as they were. Cess on demerit goods continues on top of the 40% rate.
FAQ
Do I need a new GST registration or amendment after the rate change?
No. Rates are attached to the goods and services you supply, not to your registration. Just update your product masters and invoice templates.
Can I keep selling old stock at the old MRP?
Only if the manufacturer has not revised the MRP. Where a new, lower MRP has been notified you must not charge more than it, even for stock bought earlier. Your ITC on the old purchase remains yours.
Is there still a 12% or 28% rate anywhere?
Not as a general slab. A handful of items sit at special rates (0.25%, 1.5%, 3%), and demerit goods are at 40%. Everything else is 5% or 18%.
How do I check the rate for a specific item?
Search by product name or HSN code in the HSN/SAC finder. For disputes, the CBIC rate schedule and the Council's FAQ are the authority.