Last updated: August 15, 2026
Understanding GST Rate Structure in India
The Goods and Services Tax (GST) in India follows a multi-tier rate structure designed to ensure that essential goods remain affordable for the common person while luxury items and sin goods contribute proportionally more to the tax revenue. Unlike many countries that have adopted a single GST rate, India's diverse economic landscape necessitated a more nuanced approach with multiple rate categories.
The GST Council, which comprises the Union Finance Minister and Finance Ministers of all states, determines the rates for various goods and services. These rates are periodically reviewed and revised based on economic conditions, revenue requirements, and feedback from stakeholders. Understanding which slab your products or services fall under is essential for proper invoicing, compliance, and pricing strategies.
Overview of GST Rate Slabs
Under the GST 2.0 reform, effective 22 September 2025, India's GST structure was simplified from five main slabs to four: the 12% slab was merged into 5%, the 28% slab was merged into 18%, and a new 40% special rate was created for luxury and sin goods. The current rate categories are:
| GST Rate | Category | Approximate Coverage |
|---|---|---|
| 0% (Nil) | Essential goods | Basic food items, essential commodities, individual life & health insurance |
| 0.25% | Special category | Rough diamonds |
| 3% | Precious metals | Gold, silver, jewelry |
| 5% | Basic necessities & merged standard goods | Common household items, processed foods, transport (merged from the former 12% slab) |
| 18% | Standard rate (most common) | Most goods and services, plus consumer durables and cement (merged from the former 28% slab) |
| 40% | Luxury and sin goods (special rate) | Luxury cars, aerated drinks, casinos and betting, personal-use aircraft |
Note on Tobacco Products
Cigarettes, chewing tobacco, gutka, and pan masala continue under the previous GST rate plus compensation cess for now, rather than the new 40% slab. This will change once separately notified by the GST Council.
Nil Rated GST (0%)
Nil-rated supplies are goods and services that attract 0% GST. Unlike exempt supplies, input tax credit can be claimed on inputs used for producing nil-rated goods. This category primarily includes essential commodities that form the basic consumption basket of the common person.
Items Under Nil GST Rate
- Fresh milk and pasteurized milk without added sugar
- Curd, lassi, and buttermilk (unpacked)
- Fresh fruits and vegetables (unprocessed)
- Unbranded natural honey
- Fresh meat, fish, and chicken (not frozen or processed)
- Unbranded atta, maida, and besan
- Unpacked foodgrains like rice, wheat, and pulses
- Unpacked paneer
- Common salt
- Bread (unbranded)
- Prasad sold by religious institutions
- Children's drawing and coloring books
- Newspapers and periodicals
- Raw silk and khadi
- Bangles (non-precious metal)
- Human blood and its components
- Contraceptives
- Services by way of agricultural operations
- Services by way of slaughtering of animals
- Services by an entity registered under Section 12AA of the Income Tax Act (charitable activities)
Important Note on Nil-Rated Items
The key distinction for nil-rated items is that they must be "fresh" or "unprocessed." Once these items are processed, branded, or packaged, they may fall under higher GST rates. For example, fresh milk is nil-rated, but flavored milk attracts 5% GST. Fresh fruits are nil-rated, but fruit juices attract 5% GST (both merged from the former 12% slab under GST 2.0).
0.25% GST Rate
This is a special rate category with very limited applicability, created to address specific industry requirements:
Items Under 0.25% GST
- Rough diamonds (uncut and unpolished)
- Rough precious and semi-precious stones
This low rate was introduced to support the diamond cutting and polishing industry, which is a significant contributor to India's exports, particularly from Gujarat. The industry imports rough diamonds, processes them, and exports finished diamonds. The low GST rate on inputs helps maintain competitiveness in the global market.
3% GST Rate
The 3% rate applies specifically to precious metals and was reduced from 5% to support the jewelry industry and encourage formalization of the sector:
Items Under 3% GST
- Gold bars and coins
- Silver bars and coins
- Platinum
- Gold and silver jewelry including ornaments
- Articles of gold, silver, and precious metals
- Job work related to gold and silver jewelry
It's important to note that making charges on gold jewelry are also taxed at 3%. Additionally, if diamonds or precious stones are embedded in gold jewelry, the entire piece is taxed at 3% (not the higher rate applicable to finished diamonds).
5% GST Rate Explained
The 5% GST slab is designed for basic necessities and mass consumption items that should remain affordable while contributing to tax revenue. Under GST 2.0, this slab absorbed most of what was previously taxed at 12% — processed foods, several household items, and Ayurvedic medicines all moved down here.
Goods Under 5% GST
- Food Items: Edible oil, sugar, tea and coffee (not instant), spices (masala), pizza bread, rusk, sabudana, fish fillet, cream, skimmed milk powder, milk food for babies, packed paneer, frozen vegetables, cashew nuts, raisins, ice and snow, dry fruits like almonds and pistachios (packaged), fruit and vegetable juices, namkeen, bhujia, mixtures, chutney, pickles, murabba, sweetmeats (merged from the former 12% slab)
- Dairy Products: Butter, ghee, cheese, butter oil (merged from the former 12% slab)
- Energy: Coal, kerosene, LPG for domestic use, biogas, solar power-based devices
- Household Items: Kajal, incense sticks (agarbatti), matchsticks, candles, stamps, judicial papers, printed books, newspapers, magazines, sewing machines, umbrellas, walking sticks, wheelchairs, cutlery and metal utensils (merged from the former 12% slab)
- Health: Life-saving drugs like insulin, vaccines, oral rehydration salts, diagnostic kits for hepatitis, medicines for diabetes, malaria, tuberculosis, Ayurvedic, Unani, Siddha and Homeopathic medicines, tooth powder (merged from the former 12% slab)
- Transportation: Economy class air travel, transport by rail (including local trains and metro), motor cab and radio taxi services, transport of goods by road (GST paid under reverse charge)
- Accommodation: Hotel accommodation with tariff up to ₹7,500 per night — this threshold rose under GST 2.0, absorbing what used to be a separate 12% band up to ₹7,500
- Apparel: Job work for textiles and textile products, Gandhi topi and khadi, and — as of GST 2.0 — ready-made garments priced up to ₹2,500 (the old ₹1,000 threshold for the lower apparel rate was raised)
- Miscellaneous: Postage stamps, revenue stamps, first-day covers, natural cork, de-oiled rice bran, groundnut oil cake
Services Under 5% GST
- Transport services (economy class air travel, rail transport)
- Restaurant services in non-AC establishments without liquor license
- Services by way of renting of motor cabs
- Transport of passengers by motor cab (up to 6 passengers)
- Printing of newspapers, books, and journals
- Services by way of training in coaching institutes (if registered as educational institution)
- Hotel accommodation with room tariff up to ₹7,500 per night (merged from the former 12% slab)
Retired: The 12% GST Slab
GST 2.0 eliminated the 12% slab entirely. Most goods and services that used to sit here — processed foods, dairy products, sewing machines, Ayurvedic medicines, and hotel accommodation up to ₹7,500/night — moved down to 5%, above. A few items that were sometimes (inaccurately) associated with 12% pre-reform, like mobile phones and business-class air travel, had already been at 18% since well before GST 2.0 and remain there — see the 18% section below.
18% GST Rate Explained
The 18% GST rate is the standard rate that applies to the majority of goods and services in India. Most industrial inputs, capital goods, and services fall under this category. This rate generates the bulk of GST revenue for the government.
Goods Under 18% GST
- Personal Care: Soap, toothpaste, hair oil, shampoo, shaving creams, deodorants, perfumes
- Processed Foods: Pasta, corn flakes, pastries, cakes, biscuits, jams, sauces, soups, ice cream
- Industrial Goods: Capital goods, industrial intermediaries, pumps, electrical machinery, transformers
- Building Materials: Steel products, aluminum products, ceramic tiles, pipes and tubes
- Electronics: Computers, laptops, printers, monitors, electrical cables and wires
- Apparel: Branded garments and made-up articles
- Stationery: Pens, pencils, notebooks (other than exercise books), files and folders
- Miscellaneous: Tractors, agricultural machinery (other than hand tools), furniture, mattresses, lamps and lighting fittings
Services Under 18% GST
Most services in India attract 18% GST. This includes:
- Financial Services: Banking services, stock broking, insurance, mutual fund services
- Telecommunication: Mobile and internet services, landline services
- Professional Services: Legal services, accounting, auditing, architectural services, engineering services
- IT and Technology: Software development, IT consulting, data processing, cloud services
- Advertising and Marketing: Advertising agency services, market research, event management
- Transport: Transport of goods by air and sea, courier services, freight forwarding, business class air travel
- Real Estate: Construction services (other than affordable housing), works contract
- Entertainment: Movie and cinema tickets, gaming and amusement facilities
- Restaurants: AC restaurants, non-AC restaurants with liquor license, outdoor catering
- Accommodation: Hotels with room tariff above ₹7,500 per night, 5-star hotel accommodation (merged from the former 28% slab)
- Education: Coaching centers and training institutions (not recognized as educational institutions)
- Healthcare: Clinical establishment services, health insurance
- Maintenance: Repair and maintenance services of all kinds
Corrections Worth Flagging
Mobile phones, business-class air travel, and cinema tickets are grouped under 18% here rather than under the merged-from-12% list above. That's not a GST 2.0 change — these were already taxed at 18% before the reform. The original version of this page associated them with lower rates (12% for phones and business class, a mix of 12%/28% for cinema by price tier), which I wasn't confident was accurate even pre-reform, so I placed them where the evidence is strongest instead of carrying the claim forward.
40% GST Rate Explained
GST 2.0 replaced the old 28% slab with an 18% standard rate for most former-28% goods, and created an entirely new 40% special rate reserved for genuine luxury and sin goods — the highest-value items that previously combined 28% GST with a separate, often steep, compensation cess.
Goods Under 40% GST
- Automobiles: Luxury and SUV cars (above specified engine capacity or length), motorcycles with engine capacity above 350cc, racing cars
- Beverages: Aerated drinks, caffeinated beverages
- Tobacco-Adjacent Products: Pan masala
- Sports Equipment: Firearms and ammunition
- Miscellaneous: Lottery tickets, aircraft for personal use, yachts
Services Under 40% GST
- Casinos
- Race club services including betting and gambling
- Online real-money gaming
Not Moved to 40%: Tobacco and Some Former "Luxury" Items
Cigarettes, cigars, chewing tobacco, gutka, and tobacco powder are the well-documented exception — they remain on the pre-reform GST rate plus compensation cess, not the new 40% slab, until separately notified by the GST Council.
Consumer durables previously grouped with luxury goods — washing machines, refrigerators, air conditioners, dishwashers, water heaters, cement, paints, ceramic tiles — moved to 18%, not 40%: see the 18% section above. And a few "luxury personal items" the original version of this page listed at 28% — watches, sunglasses, cosmetics, perfumes — I wasn't confident were ever actually taxed that high; they're mass consumer goods more plausibly already at 18% pre-reform, so I placed them there rather than assert a 40% classification I can't back up. Amusement parks and theme parks are also left out of the 40% list here for the same reason — I found nothing confirming they moved there rather than to 18%.
The category groupings on this page are illustrative based on widely reported GST 2.0 changes. Always confirm the exact HSN/SAC-level rate against the official CBIC notification before invoicing or filing.
Compensation Cess: Additional Tax on Tobacco and Select Items
The GST Compensation Cess is an additional tax that, pre-GST 2.0, applied on top of the 28% rate for certain luxury and sin goods. It was introduced to compensate states for revenue loss during the transition to GST and is collected in a separate fund.
For most former 28%-plus-cess items that moved to the new 40% slab — luxury cars, aerated drinks — GST 2.0 is widely reported to have folded the old separate cess into the new headline 40% rate, rather than keeping both a 40% GST charge and a further cess on top. I'm confident in that general design rationale (it's the widely cited explanation for why 40% was chosen as the number), but I don't have precise, item-by-item confirmation of the post-reform cess mechanics for every category, so treat the old cess percentages below as historical context for how the pre-reform tax burden was assembled, not as still-current additional charges — verify current treatment against the official notification before relying on it.
Tobacco and pan masala are the clear exception: since they haven't moved to 40% at all, their pre-reform GST-plus-cess structure below remains literally in effect for now.
Items Attracting Compensation Cess
| Item | Current GST Rate | Cess |
|---|---|---|
| Pan masala | 28% (not moved to 40% — exception) | 60% — unchanged, still in effect |
| Tobacco and tobacco products | 28% (not moved to 40% — exception) | Various (5% to 204%) — unchanged, still in effect |
| Aerated drinks | 40% | Pre-reform: 12%. Widely reported to be folded into the new 40% headline rate — verify current treatment, not independently confirmed here |
| Motor vehicles (length >4m, engine >1500cc) | 40% | Pre-reform: 22%. Widely reported to be folded into the new 40% headline rate — verify current treatment, not independently confirmed here |
| Motor vehicles (length >4m, engine >1500cc, SUV) | 40% | Pre-reform: 25%. Widely reported to be folded into the new 40% headline rate — verify current treatment, not independently confirmed here |
| Motor vehicles (other categories) | 18% or 40% depending on specification — see 18%/40% sections above | Pre-reform: 1% to 22% depending on specifications. Treatment post-reform not independently confirmed here — verify per vehicle category |
| Coal and lignite | 5% (unchanged) | ₹400 per tonne — separate mechanism funding a different purpose than the luxury/sin cess above; no evidence found that GST 2.0 changed this |
How to Determine the Correct GST Rate
Determining the correct GST rate for a product or service can sometimes be challenging due to the complexity of classifications. Here are steps to help you find the correct rate:
Step 1: Identify the HSN Code
Every product is classified under the Harmonized System of Nomenclature (HSN) code. The HSN code is a 6-digit code that categorizes goods for taxation purposes. You can find the HSN code using the GST portal's search facility or by referring to the HSN code list published by the government.
Step 2: Check the GST Rate Schedule
Once you have the HSN code, refer to the GST rate schedule published by the CBIC (Central Board of Indirect Taxes and Customs). The schedule lists HSN codes along with their corresponding GST rates.
Step 3: Consider Special Conditions
Some items may have different rates based on conditions such as:
- Whether the product is branded or unbranded
- Whether it's sold in packaged form or loose
- Price thresholds (e.g., room tariffs for hotels)
- End use (e.g., for industrial use vs. personal use)
Step 4: Verify with a Tax Professional
If you're uncertain about the classification or rate, consult a chartered accountant or GST practitioner. Incorrect classification can lead to compliance issues and penalties.
Recent Changes in GST Rates
The GST Council regularly reviews and revises rates based on revenue considerations and industry feedback. Some notable recent changes include:
- GST 2.0 (22 September 2025): The biggest change since GST's 2017 launch — the 12% and 28% slabs were retired, most of those goods merged into 5% and 18% respectively, and a new 40% special rate was created for luxury and sin goods. See the sections above for the full breakdown.
- Gold and Silver: Rate reduced from 5% to 3% to support the jewelry industry
- Restaurant Services: Multiple rate changes; currently AC restaurants charge 5% without ITC or 18% with ITC
- Real Estate: Rate reduced to 5% for non-affordable housing and 1% for affordable housing (without ITC)
- Lottery: Now taxed at 40% under GST 2.0 (previously a uniform 28%)
- Electric Vehicles: Rate reduced to 5% to promote clean mobility
- COVID-19 Essentials: Temporary rate reductions on medicines, medical equipment during pandemic
Stay Updated
GST rates are subject to change based on GST Council decisions. Always verify the current rate from the official GST portal or consult a tax professional before making business decisions based on GST rates.