New GST Rates 2026: Updated Slab List
For eight years, Indian shoppers and businesses had to navigate four main GST rates and a maze of exceptions. From 22 September 2025, that changed. The government collapsed the structure into two main slabs and cut tax on hundreds of everyday items, in what it called a Diwali gift to the common man. The result is the most consequential GST rate revision since the tax launched in 2017.
The new GST rates follow a simplified two-slab structure of 5% and 18%, with the earlier 12% and 28% slabs removed, and a separate 40% rate reserved for luxury and sin goods. The revised rates took effect on 22 September 2025 after approval at the 56th meeting of the GST Council.
This guide sets out the updated GST slab list for 2026 in clear tables, showing which categories moved to nil, 5%, 18%, and 40%. It draws directly on the government's own announcement so the figures are authoritative.
The new GST slab structure
India now has two principal GST rates, 5% for essentials and 18% for standard goods and services, plus a 40% rate for a narrow set of luxury and sin items. This replaced the previous four-slab system of 5%, 12%, 18%, and 28%.
| Slab | Applies to |
|---|---|
| Nil (0%) | Essential foods, key medicines, individual life and health insurance |
| 5% | Daily essentials, household goods, farm inputs, many services |
| 18% | Standard goods and services, consumer durables, small vehicles |
| 40% | Luxury and sin goods such as tobacco, pan masala, aerated drinks, high-end cars |
The reform removed the 12% and 28% slabs entirely, pushing most 12% items down to 5% and most 28% items down to 18%. A small group of demerit goods moved up to the new 40% rate to preserve revenue and fairness. To work out the tax amount on any price at the new slabs - adding GST to a base price or extracting it from an inclusive one, with the CGST/SGST split - use IndiaPost's free GST calculator.
"The revised rates and exemptions will come into effect from 22nd September 2025, ensuring timely relief for the common man, households, farmers, and businesses." (Press Information Bureau, Government of India, 4 September 2025.)
Old structure versus the new structure
The pre-reform system ran on four main slabs of 5%, 12%, 18%, and 28%, plus a compensation cess on some goods, which created frequent disputes over which rate applied. The new system keeps only 5% and 18% as the working rates, with nil for essentials and 40% for a narrow set of demerit goods.
The practical effect is that the two mid-range slabs disappeared: most 12% goods dropped to 5%, and most 28% goods dropped to 18%. This removed the ambiguity that arose when similar products sat in different slabs, which had been a common source of litigation.
| Aspect | Before 22 Sep 2025 | After 22 Sep 2025 |
|---|---|---|
| Main slabs | 5%, 12%, 18%, 28% | 5%, 18% |
| Top rate | 28% plus cess | 40% on luxury and sin goods |
| Essentials | Mix of nil, 5%, 12% | Nil or 5% |
What became cheaper: food and household goods
Many everyday food and household items moved to nil or 5%, directly lowering the cost of a typical shopping basket. Ultra-high-temperature (UHT) milk, pre-packaged paneer, and all Indian breads moved to a nil rate.
| Item | Old rate | New rate |
|---|---|---|
| UHT milk, paneer, Indian breads | 5% / 12% | Nil |
| Soaps, shampoos, toothpaste, toothbrushes, bicycles | 12% / 18% | 5% |
| Namkeen, bhujia, sauces, pasta, chocolates, coffee | 12% / 18% | 5% |
| TVs (above 32 inch), ACs, dishwashers | 28% | 18% |
Household goods such as soaps, shampoos, toothpaste, and bicycles dropped to 5%, while consumer durables including televisions, air conditioners, and dishwashers fell from 28% to 18%. The dual effect lowers prices for consumers and supports domestic electronics manufacturing.
For a typical family, the cuts touch the daily shopping basket directly, since staples, personal-care items, and packaged foods all moved down. The government's expectation is that retailers pass these reductions through to shelf prices rather than absorbing them as margin.
What became cheaper: autos, farming, and construction
Small vehicles, farm machinery, and cement all saw sharp cuts, supporting the middle class, farmers, and the housing sector. Small cars and two-wheelers up to 350cc moved from 28% to 18%.
| Item | Old rate | New rate |
|---|---|---|
| Small cars, two-wheelers up to 350cc | 28% | 18% |
| Buses, trucks, three-wheelers, auto parts | 28% | 18% |
| Tractors | 12% | 5% |
| Harvesters, threshers, drip irrigation, sprinklers | 12% | 5% |
| Cement | 28% | 18% |
Tractors fell from 12% to 5%, and a range of farm equipment including harvesters, threshers, and drip irrigation systems moved to 5%, reducing input costs for agriculture. Cement dropped from 28% to 18%, lowering the cost of housing and infrastructure.
The cement cut is significant for the housing sector, since it lowers a major input cost for both individual home builders and large infrastructure projects. The auto cuts, meanwhile, reduce the on-road price of mass-market two-wheelers and small cars that the middle class buys most.
What became cheaper: health, education, and services
Healthcare and education saw some of the deepest cuts, with 33 life-saving drugs and diagnostic kits moving from 12% to nil. Individual life and health insurance premiums were fully exempted from GST.
| Item or service | Old rate | New rate |
|---|---|---|
| 33 life-saving drugs, diagnostic kits | 12% | Nil |
| Individual life and health insurance premiums | 18% | Nil (exempt) |
| Other medicines (including Ayurveda, Unani) | 12% | 5% |
| Spectacles and corrective goggles | 28% | 5% |
| Exercise books, pencils, erasers, crayons | 12% | Nil |
| Hotel stays up to ₹7,500 per day | 12% | 5% |
| Gyms, salons, barbers, yoga | 18% | 5% |
Education became more affordable as exercise books, pencils, erasers, and crayons moved to a nil rate. Wellness and hospitality services such as gyms, salons, and hotel stays up to ₹7,500 a day were cut to 5%.
GST on services after the reform
The reform extended well beyond goods, cutting GST on several common services that households use regularly. Hotel stays priced up to ₹7,500 per day moved from 12% to 5%, and personal-care and wellness services such as gyms, salons, and yoga fell from 18% to 5%.
The exemption of individual life and health insurance premiums, previously taxed at 18%, is among the most significant service changes, lowering the cost of financial protection. The government linked this to its goal of wider insurance coverage by 2047.
Standard business and professional services largely remain at 18%, the new standard rate, so the service-sector cuts were targeted at consumer-facing categories. This keeps the reform focused on everyday affordability rather than across-the-board service reductions.
How household budgets benefit
The combined effect of the cuts is a measurable reduction in the tax component of a household's regular spending, from groceries and personal care to a two-wheeler or a hotel stay. Because the changes hit high-frequency purchases, the saving accumulates across a year rather than appearing as a single large rebate.
A family insuring its health gains the most visible benefit, since an 18% tax on premiums became a full exemption, directly lowering the cost of cover. Households building or renovating a home benefit from the cement cut, while those buying school supplies see a nil rate on basic stationery.
The government's stated logic is a virtuous cycle: lower prices lift demand, higher demand widens the tax base, and a broader base ultimately sustains revenue. Whether the full benefit reaches consumers depends on retailers passing the cuts through rather than retaining them.
What stays high: the 40% luxury and sin slab
A narrow set of luxury and sin goods now sits at 40%, the highest GST rate, to balance revenue against the wide cuts elsewhere. This slab covers pan masala, tobacco, aerated drinks, high-end cars, yachts, and private aircraft.
For specified goods such as cigarettes, chewing tobacco, zarda, unmanufactured tobacco, and beedi, the government noted that existing rates and compensation cess continue to apply until a later date, pending settlement of compensation cess liabilities. So the 40% rate did not take immediate effect on every tobacco product on 22 September 2025.
"A 40% rate on luxury and sin goods such as pan masala, tobacco, aerated drinks, high-end cars, yachts, and private aircraft ensures fairness and revenue balance." (Press Information Bureau, Government of India, 4 September 2025.)
The decision to keep some tobacco products at their old rates and cess until later reflects the compensation cess obligations the government must first discharge. Once those liabilities are settled, the affected items are expected to move to the new 40% rate by separate notification.
What the reform means for businesses and consumers
The two-slab system is designed to cut disputes, speed up refunds, and lower compliance costs, especially for the MSMEs and startups that make up most GST registrations. Registration and return filing were simplified alongside the rate changes.
For consumers, the reform lowers the effective tax on a large share of everyday spending, from groceries to small vehicles. The underlying mechanics of how GST is charged and credited are explained in the GST full form and meaning guide, and businesses file under the new rates through the GST portal.
How businesses should adjust to the new rates
Businesses had to update billing systems, price lists, and accounting software to reflect the new slabs from 22 September 2025, since charging an outdated rate creates compliance risk. Retailers also had to manage existing stock bought at old rates while selling at the new ones.
Correctly classifying each product under the revised slabs is the most important task, because a wrong classification can mean under or over-charging GST. For ambiguous items, businesses should rely on the official notification rather than assume the slab from a similar product.
The lower rates also affect input tax credit calculations and pricing strategy, so finance teams reviewed margins after the change. Passing the benefit of lower rates to consumers was an explicit expectation of the reform. For quick invoice arithmetic at the new rates, the GST calculator adds or removes GST at 5%, 18% or 40% and shows the CGST/SGST split.
How to check the rate for a specific product
The most reliable way to confirm a product's GST rate is to match its HSN or SAC code against the latest official rate notification, rather than relying on a general category. The GST Council publishes item-level changes, and the rate for a borderline product can hinge on its exact classification - IndiaPost's HSN code finder looks up the code and indicative rate for a product by keyword.
For everyday goods the slab is usually clear, but mixed or composite products can fall into a different rate than they appear to. When in doubt, a business should check the official notification or seek professional advice before fixing a selling price.
Because rates are revised periodically, a figure that was correct at one point may change at a later GST Council meeting. Treating the official notification as the single source of truth avoids both under-collection and overcharging a customer.
Looking ahead
The government expects the lower rates to drive a virtuous cycle in which cheaper goods lift demand, widen the tax base, and ultimately raise collections, as past rationalisations have. Importers and exporters should read the new GST rates alongside customs duty, since both apply to cross-border trade, as covered in the customs duty guide.
Because the GST Council revises rates periodically and notifies item-level changes, the slab for a specific product should always be confirmed against the latest official notification before pricing or invoicing. The 2025 reform set the structure, but the detail continues to evolve.
Key takeaways
- From 22 September 2025, GST runs on two main slabs, 5% and 18%, with the old 12% and 28% rates removed.
- A separate 40% rate applies to luxury and sin goods such as pan masala, aerated drinks, and high-end cars.
- Many essentials moved to nil, including UHT milk, paneer, Indian breads, 33 life-saving drugs, and school supplies.
- Consumer durables and small vehicles fell from 28% to 18%, while tractors and farm equipment dropped to 5%.
- Individual life and health insurance premiums are now fully exempt from GST.
- Use the GST calculator for add/remove GST arithmetic and the HSN code finder to check a product's classification.
Methodology
This slab list is compiled from the Press Information Bureau backgrounder on the Next-Gen GST reforms dated 4 September 2025, which details the rate changes effective 22 September 2025. GST rates are set by the GST Council and revised through notifications, and some tobacco products retain earlier rates until separately notified, so the rate for any specific item should be verified against the latest official notification before use. This article is general information about taxation and is not tax or financial advice.