New GST Rates 2025: the 5% / 18% / 40% structure explained

6 min read · GST

The GST Council rationalised India's rate structure with effect from 22 September 2025. The headline change is a move to two principal slabs — a 5% merit rate for essentials and a 18% standard rate — with a separate 40% de-merit rate for a narrow set of luxury and sin goods. This is a plain-English guide to the new structure and what it means for your invoices. It is general information, not tax advice — always confirm the rate for a specific item against the latest CBIC notification for your HSN, or with your CA.

The new slab structure

After the changeover the everyday structure is simpler:

0% (exempt) — unbranded staples and other exempt/nil-rated supplies, unchanged in principle.

5% — the merit rate — essential and mass-consumption goods and services.

18% — the standard rate — the default for most goods and services.

40% — the de-merit rate — a narrow band of luxury and sin goods (think tobacco-type and other “sin” categories, and select luxury items).

Alongside these, the pre-existing special rates continue: 0.25% on rough diamonds and 3% on gold and other precious metals. Those were not part of the rationalisation and carry on as before.

What happened to 12% and 28%?

The earlier 12% and 28% slabs were removed for new supplies from the changeover date. In broad terms, many items that used to sit at 12% were folded into the 5% merit rate, and many that sat at 28% moved to the 18% standard rate — while a small set of luxury/sin goods that were at 28% (often with cess) now sit at the 40% de-merit rate. These are category-level directions of travel, not a guarantee for any single product: some items moved differently, so treat the 12%→5% and 28%→18% framing as a rule of thumb and verify against the latest CBIC notification for your specific HSN.

Note that 12% and 28% do not simply vanish from your records. They remain valid on documents dated before the changeover — an invoice, credit note or return for a pre-22-September-2025 supply keeps the rate that applied then. Only new supplies follow the new structure.

Illustrative category moves

A few widely-reported, category-level examples of the direction of change (each to be confirmed for your exact HSN):

Many everyday household and food items that were at 12% moved down to the 5% merit rate. Many mainstream consumer goods that were at 28% moved down to the 18% standard rate. A narrow set of luxury and sin goods sits at the 40% de-merit rate.

Because a single HSN can behave differently from its category, do not rely on these examples to bill. Every rate you charge must match the code on the line, and the code and rate should agree with the current CBIC notification. When in doubt, verify against the latest CBIC notification for your specific HSN.

FAQ

Is the 28% slab gone? The 28% slab was removed for new supplies from 22 September 2025. Most former-28% items now fall under the 18% standard rate, while a narrow set of luxury/sin goods sits at the 40% de-merit rate. Confirm your specific item against the current CBIC notification.

What about invoices raised before the change? Documents dated before the changeover keep the rate that applied then — 12% and 28% remain valid on pre-22-September-2025 supplies. Only new supplies follow the new 5% / 18% / 40% structure.

Which slab is my product in? That is decided by your item's HSN code, not by its category alone. Look up the code with the HSN finder, then confirm the rate against the latest CBIC notification for that HSN — or check with your CA — before you charge it.

General information, not tax advice. GST rates change with Council decisions — confirm the current figure for your HSN against the latest CBIC notification or with your CA.