Last updated: August 30, 2026
I rebuilt the calculator’s rate table the week GST 2.0 rolled out, and the short version is this: from 22 September 2025, India’s old four-slab structure (5%, 12%, 18%, 28%) became a three-tier system — 5%, 18%, and 40% — with gold, silver, and precious stones keeping their own separate low rates (0.25% and 3%). Most everyday purchases got cheaper. Tobacco, pan masala, aerated drinks, and a handful of other “sin” categories got pushed up into the new 40% tier instead.
Why the Old System Needed Fixing
GST launched in July 2017 by folding a tangle of central and state taxes into one system, but it kept four main rate slabs — 5%, 12%, 18%, and 28% — plus a compensation cess stacked on top of the highest one. Eight years in, that structure was showing its age. Businesses kept ending up in classification fights over which slab a product belonged in (the “papad vs fryums” disputes are the famous example, but there were dozens of quieter ones). Several sectors had an inverted duty structure, where inputs were taxed higher than the finished product, which just traps working capital in unclaimed input tax credit. And the 12% slab in particular never had a clean logic to it — it applied to a narrow, oddly-assembled set of goods that always felt like a rounding error between 5% and 18%.
GST 2.0, cleared by the GST Council and effective from 22 September 2025, was the fix: fewer slabs, and a cleaner sort of which goods land where.
The New Three-Tier Structure
| Rate | Category | Examples |
|---|---|---|
| 0% | Exempt / essential items | Fresh produce, unbranded food grains, healthcare and education services, life-saving drugs |
| 0.25% / 3% | Special low rates | Rough diamonds and precious stones (0.25%), gold, silver, and jewellery (3%) |
| 5% | Essential / merit goods | Packaged food staples, medicines, agricultural inputs, footwear and apparel below threshold value |
| 18% | Standard rate | Most goods and services — electronics, professional services, machinery, restaurants (non-AC) |
| 40% | Luxury / sin goods | Tobacco, pan masala, aerated drinks, luxury cars, online gaming and gambling services |
If you want to check a specific transaction against the new rates rather than take my word for it, the GST calculator on this site is already updated for GST 2.0.
Where Did the Old 12% and 28% Slabs Go?
Both were retired, and their contents got redistributed rather than just disappearing. Most of what used to sit at 12% moved down to 5% — that covers a lot of packaged and processed food, plus some everyday consumer goods, so those got cheaper. The old 28% slab split in two directions: mass-market goods that were only taxed that high for revenue reasons dropped to 18%, while the genuinely premium and sin-tax categories (tobacco, pan masala, aerated beverages, high-end vehicles) moved up into the new 40% slab. That folds the old “28% plus compensation cess” arrangement into one flat number instead of two moving parts.
Because far more things moved down than up, the net effect on a typical household’s monthly spending has been a reduction in GST paid overall — I went through the actual category-by-category breakdown separately in what got cheaper and what got costlier under GST 2.0, if you want the specifics rather than the general trend.
CGST, SGST, and IGST Haven’t Changed
It’s worth being clear about what GST 2.0 actually touched: it changed which rate applies to a given good or service, not how that rate gets split once it’s charged. The dual-GST mechanics are exactly the same as before — on an intra-state sale, the applicable rate still splits evenly into CGST and SGST (an 18% item is still 9% CGST + 9% SGST), and on an inter-state sale, the full rate is still charged as IGST. If you need the full mechanics with worked examples, I’ve laid those out in the CGST, SGST, and IGST guide.
How Different Sectors Were Affected
| Sector | Impact |
|---|---|
| FMCG / Packaged Food | Broadly cheaper — most items shifted from 12% to 5% |
| Healthcare & Insurance | Health and life insurance premiums moved to exemption — covered in the insurance GST exemption guide |
| Automobiles | Mass-market vehicles moved to 18%; luxury and premium segments moved to 40% |
| Tobacco & Aerated Drinks | Consolidated into the 40% slab, replacing the old cess-plus-28% system |
| Agriculture | Cultivation inputs largely retained at 5% or exempted — more detail in the agriculture GST guide |
If You Run a Business, Here’s What Actually Needs Doing
Re-checking HSN/SAC classifications against the new rate schedule is the obvious first step, but it’s easy to underestimate how much billing and ERP configuration depends on getting that right — invoices need to auto-apply the new rate, not the one from six months ago. Worth reviewing pricing too: a rate cut only benefits the customer if it’s actually passed through, and anti-profiteering scrutiny on that point is real, not theoretical. If your sector had an inverted duty structure before, it’s worth reassessing your ITC position now that the slabs have shifted underneath it. And practically speaking, retrain whoever handles billing — old habits around the retired 12% and 28% slabs are the most common source of misclassification I’ve seen mentioned since the change went live.
A Few Questions People Keep Asking
When exactly did GST 2.0 take effect?
22 September 2025 — that’s the date the three-tier structure became live.
Are there still rates outside 5%, 18%, and 40%?
Yes. Gold, silver, and precious stones kept their own special low rates (0.25% and 3%), and the 0% exempt category for essentials is still there too.
Did this change how CGST/SGST/IGST are calculated?
No — only which rate applies to what. The intra-state CGST/SGST split and the inter-state IGST mechanism work exactly as they did before.
GST 2.0 is the biggest simplification of India’s rate structure since the 2017 launch — four slabs and a patchwork cess system traded for three clean tiers. For most households the net effect has been positive; for businesses, the real work is re-mapping classifications and making sure any rate cut actually reaches the customer. The GST calculator is updated for the new structure if you want to check a specific transaction.
Related reading: GST Slabs Explained, what got cheaper and costlier under GST 2.0, and where GST is headed next.