GST rates from 22 September 2025: 5%, 18% and 40% explained

What changed and when

The GST Council met for the 56th time on 3 September 2025. It agreed to cut GST from four main slabs to two. The PIB release calls them a "merit rate" of 5% and a "standard rate" of 18%. A special 40% rate covers a select few goods and services.

The new rates on services, and on most goods, started on 22 September 2025. One group of goods was held back, which we cover in the 40% section.

The main changes in one list

• Main slabs now: 0%, 5%, 18% and 40%.
• The 12% and 28% slabs no longer exist. Items in them moved up or down.
• Compensation cess was withdrawn for most goods. This was an extra levy on some goods on top of GST. On tobacco and pan masala it was cut to nil from 1 February 2026, so the cess is now fully withdrawn.
• Individual life and health insurance became exempt from GST.
• Special rates apply to gold, silver and jewellery (3%), rough diamonds (0.25%) and cut diamonds (1.5%).

To see what any rate means for a price, use the GST calculator. It adds or removes GST and shows the CGST and SGST split.

Old slab → new slab

The biggest moves came from the two slabs that were removed. Many items at 12% went down to 5%. Many items at 28% went down to 18%. A few items at 28% went up to 40%. Some items moved more than one step, such as from 18% to 5%.

Example items and the effect on a ₹1,000 price

The table shows real examples from the GST Council's list. The last column shows how the bill changes on an item priced ₹1,000 before GST.

How we worked this out: we took a price of ₹1,000 before GST and added the old rate, then the new rate, using the same tested code as our GST calculator. Old and new rates are from the PIB release on the 56th GST Council meeting, Annexures I and III. *Some 28% goods also paid compensation cess, which this table leaves out. For those items the real change could be smaller, or even a cut. Shop prices also depend on what sellers choose to pass on.

Items now exempt

Some everyday items moved to nil GST. That means no GST is charged on them. The release names these:

• Ultra-high temperature (UHT) milk, from 5%.
• Chena or paneer, pre-packaged and labelled, from 5%.
• Indian breads such as chapati, roti, paratha and parotta.
• All individual life insurance, whether term, ULIP or endowment, from 18%.
• All individual health insurance, including family floater and senior citizen policies, from 18%.
• 33 lifesaving drugs and medicines, from 12%, and 3 more from 5%. These treat cancer, rare diseases and other severe chronic diseases.

On a ₹20,000 health insurance premium, 18% GST used to add ₹3,600. With the exemption, that GST is no longer charged. Your insurer sets the premium, so check your renewal notice.

The 5% slab

The 5% rate is now the home of most daily-use goods. Many items came down from 12%, and some from 18%. Examples from the release:

• Personal care: hair oil, shampoo, toilet soap bars, toothpaste and toothbrushes.
• Food: butter, ghee, cheese, chocolates, coffee, pasta, instant noodles, sauces, and packaged namkeen and bhujia.
• Household: bicycles, tableware and kitchenware.
• Farming: tractors and many farm machines.
• Health: all other drugs and medicines, plus items like bandages, diagnostic kits and glucometers.
• Services: hotel rooms up to ₹7,500 a night, and gyms, salons, barbers and yoga centres.

For hotels, gyms and salons, the 5% rate comes "without ITC". ITC is input tax credit: the GST a business paid on its own costs, which it could normally set off. At 5% without ITC, the business can't claim that credit.

The 18% slab

The 18% rate is the standard rate. Most goods and services that were already at 18% stayed there. Many items that were at 28% came down to it:

• Air conditioners, dishwashers and all television sets.
• Small cars, and motorcycles up to 350cc.
• Buses, trucks, ambulances and three-wheelers.
• All auto parts, at one uniform 18%.
• Cement.

Worked example: an air conditioner

Say an AC costs ₹30,000 before GST, bought in your own state. Here is the bill at the old 28% and the new 18%.

Price before GST

₹30,000

Total at the old 28%

₹38,400

Total at the new 18%

₹35,400

Less GST on the bill

₹3,000

At 18%, the GST is ₹5,400. Inside one state that is CGST ₹2,700 plus SGST ₹2,700. If the seller is in another state, the full ₹5,400 is IGST. The shop sets its own price, so treat this as an estimate of the tax part only.

The 40% slab

The 40% rate is a special rate for a select few goods and services. The release calls it a "de-merit" rate. It takes the place of the old 28% rate plus compensation cess on these items.

Goods at 40%

• Drinks with added sugar or flavouring, including aerated waters, and caffeinated drinks.
• Pan masala, cigarettes and other tobacco products other than bidi, from 1 February 2026 (see the note below). Bidi is at 18%.
• Motorcycles above 350cc.
• Bigger cars that don't count as small cars.
• Aircraft for personal use, and yachts.
• Revolvers and pistols, and smoking pipes.

Services at 40%

• Entry to casinos, race clubs, and sporting events like the IPL.
• Betting, gambling, horse racing, lottery and online money gaming.
• Renting out goods that are themselves taxed at 40%, without an operator.

A note on tobacco and pan masala

These were not part of the 22 September 2025 start. From 1 February 2026, pan masala, cigarettes and other tobacco products (other than bidi) are taxed at 40%, and bidi at 18%. Compensation cess on these goods was cut to nil from the same date, so the cess is now fully withdrawn. This was done by Notifications 19/2025-CT(Rate) and 03/2025-Comp. Cess (Rate) of 31 December 2025, as reported in the GST Council newsletter for December 2025.

On a ₹1,00,000 price before GST, 40% adds ₹40,000. Sold to another state, all ₹40,000 is IGST.

Gold, silver and diamonds

Precious metals and stones don't use the main slabs. They have their own low rates:

How we worked this out: ₹1,00,000 before GST, with each rate added by our tested GST code.

Bought in your own state, a ₹1,03,000 jewellery bill holds ₹3,000 of GST: CGST ₹1,500 and SGST ₹1,500. The price before GST is ₹1,00,000. A jeweller's bill may also show making charges. Ask how GST is worked out on each part.

How to check your item's rate

The examples here are a small part of the full list. The rate on your item depends on its exact description and its HSN code (for goods) or SAC code (for services). These codes are on most GST invoices.

1. Find the HSN or SAC code on your invoice, or ask your supplier for it.
2. Look up the code on CBIC's GST goods and services rates page. Check the date the list was last updated.
3. Check the official rate notifications on CBIC's tax information portal for any later change.
4. Put your price and rate into the GST calculator to see the tax and the CGST and SGST split.

If an item has a discount, take the discount off first, then add GST. The discount calculator helps with the first step. If you run a business, ask a CA how the change affects your invoices and input tax credit.

Sources

• PIB: Recommendations of the 56th meeting of the GST Council (3 September 2025), with rate annexures
• CBIC: GST goods and services rates
• GST Council newsletter, December 2025: tobacco at 40%, bidi at 18%, compensation cess nil from 1 February 2026
• CBIC: CGST Rules, rule 35 (value of supply inclusive of tax)

By the OnlineCalculator.pro team. Checked against the sources above on 15 October 2026.

For education only, not tax advice. Based on GST rates in force for FY 2026-27. Check with a CA or the CBIC notifications before you bill or file.