GST simplified: two main slabs, and what to check in your invoicing
Since 22 September 2025 most goods and services are taxed at 5% or 18%, with a 40% rate for luxury and sin goods. Here's what businesses should have done, and what to recheck.
The GST Council’s rate rationalisation took effect on 22 September 2025. The old four-slab structure of 5%, 12%, 18% and 28% has mostly collapsed into two.
| Rate | What falls here |
|---|---|
| 5% | Most daily-use items and many goods earlier at 12% |
| 18% | Standard rate, including most items earlier at 28% such as small cars, ACs and TVs |
| 40% | Luxury and sin goods, such as pan masala, aerated and sugary drinks and high-end vehicles |
| Nil | Unchanged essentials, plus individual life and health insurance premiums |
Five things to check in your business
- Item master and HSN codes. Every product in your billing software must carry its new rate. Old rates left in the system mean wrong invoices.
- Price lists and MRP. The government expects rate cuts to be passed on to customers. Keep a record of how your prices changed.
- Open orders and advances. For supplies spanning the change date, the time-of-supply rules decide which rate applies.
- Input tax credit. If your output rate fell below your input rate, you may build up unused credit. Plan for it and check whether an inverted-duty refund applies.
- Contracts. Long-term contracts that quote “GST @ 12%” or “@ 28%” should say “GST as applicable”.
If you sell both goods and services, check that bundles are classified correctly as composite or mixed supplies. The rate depends on it.
Not sure how this affects you?
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