GST 2.0: Updated GST Rates (Effective 22 Sept 2025) & What They Mean for Your Business
India’s GST 2.0 has simplified slabs and revised rates across a wide range of goods and services. For business owners, the takeaway is simple: review your items, update tax masters and print formats, and start billing with the new GST rate without delay.
The new GST rate structure at a glance
| GST Slab | What typically falls here | Why it matters |
|---|---|---|
| 0% | Essentials such as fresh milk, eggs, curd; unpackaged foodgrains; core educational & healthcare services | Keeps essentials affordable and compliance simple |
| 5% | Many daily-use consumer goods and packaged foods | Lower tax burden on common household items |
| 18% | Standard slab for most goods & services (e.g., insurance, telecom, ticketing; many consumer durables now shifted here) | The default operating slab for most businesses |
| 40% | Luxury & sin goods (e.g., premium cars, high-end bikes, aerated beverages) | Disincentivises non-essential or harmful consumption |
| Special rates | 3% (precious metals/jewellery category); 0.25% (certain diamonds/stones) | Narrow, item-specific slabs that continue under GST 2.0 |
Key item movements (old GST rate → new GST rate)
0% GST (Exempt)
| Product / Service | Old GST rate | New GST rate |
|---|---|---|
| Individual life & health insurance policies | 18% | 0% (Exempt) |
| Maps, charts & globes | 12% | 0% (Exempt) |
| Pencils, sharpeners, erasers, crayons & notebooks | 5%–12% | 0% (Exempt) |
| Pre-packaged & labelled paneer | 5% | 0% (Exempt) |
| Indian breads (roti, paratha, parotta, etc.) | 5% | 0% (Exempt) |
Essentials like unbranded milk , unpacked grains , fresh fruits and vegetables , and core healthcare services remain at 0%.
5% GST
| Product / Service | Old GST rate | New GST rate |
|---|---|---|
| Hair oil, shampoo, soap & toothpaste | 18% | 5% |
| Edible oils, butter, ghee, cheese & dairy spreads | 12% | 5% |
| Packaged foods (namkeen/biscuits, pasta, cereals, etc.) | 12%–18% | 5% |
| Utensils & kitchenware; bicycles | 12%–18% | 5% |
| Apparel & footwear up to ₹2,500 | 12% | 5% |
| Jams/sauces/pickles/soups; dry fruits & nuts | 12%–18% | 5% |
| Hotels (₹1,000–₹7,500 tariff), salons/gyms/yoga services | 12%–18% | 5% |
| Primary inputs like packaging materials | 12%–18% | 5% |
18% GST
| Product / Service | Old GST rate | New GST rate |
|---|---|---|
| Consumer durables (ACs, TVs, refrigerators, washing machines) | 28% | 18% |
| Small cars (mass-market) & motorcycles ≤350cc | 28% | 18% |
| Commercial vehicles; auto parts | 28% | 18% |
| Cement; batteries | 28% | 18% |
| Capital goods & industrial intermediates | 18% | 18% |
| Telecom (postpaid mobile) & broadband services | 18% | 18% |
| Many consumer electronic items | 28% | 18% |
40% GST
| Product / Service | Old GST rate + cess | New GST rate |
|---|---|---|
| Luxury & premium cars | 28% + up to 22% cess | 40% |
| Motorcycles >350cc (premium bikes) | 28% + cess (varied) | 40% |
| Aerated & carbonated beverages | 28% + cess (varied) | 40% |
| Betting & online gaming (industry overview) | 28% | 40% |
| Performance parts such as tyres | 28% + cess (varied) | 40% |
Special rates that continue
| Products | New GST rate |
|---|---|
| Gold & jewellery (select items) | 3% |
| Non-industrial / semi-processed diamonds | 0.25% |
| Silver items | 3% |
Note: Some items within luxury/sin categories will transition into the 40% slab over time. Always verify HSN/SAC-wise applicability before invoicing.
What MSMEs/SMEs should do right now
Review your item master
Map each SKU/service to its correct new GST rate. Pay special attention to items that moved from 28%→18% and 12%→5%.
Update billing & print formats
Reflect the new GST rate on invoices, estimates, delivery challans, e-way bills, and credit/debit notes.
Revise pricing & margin policies
With certain rates reduced (e.g., 28%→18%, 12%→5%), review MRPs, discounting, and landed costs to stay competitive.
Reconfigure HSN/SAC & tax logic
Ensure your tax computation and rounding rules match current slabs; keep a changelog for audit trails.
Communicate proactively
Inform customers and partners about price/tax changes to avoid disputes and returns.
How BUSY helps you switch to the new GST rate—fast
- One-time GST master update: Quickly update item-wise tax rates in bulk.
- Auto-apply correct tax on billing: BUSY auto-picks HSN/SAC-based rates to prevent manual errors.
- GST print formats ready: Invoice, e-way bill, e-invoice, and credit/debit notes reflect the new GST rate instantly.
- Accurate returns & reconciliations: File GSTR-1/3B with confidence; reconcile with vendors/customers faster.
- Audit-friendly logs: Maintain rate-change history and item-level trails for compliance reviews.
- Desktop + Cloud + Mobile: Work from office or on the go—your latest GST settings follow you everywhere.
I am a Chartered Accountant with over 20 years of experience and a finance content writer. I focus on educating people about finance and taxation. I have written many blog posts on finance, taxation, trading, and investment on the BUSY website. My goal is to increase financial understanding by making complex concepts easier to grasp and to support educational programs in India.