New GST Rates: How the 18% to 12% and 5% Changes Will Affect Your Purchases
If you have been hearing that “new GST rates” reduced many items from 18% to 12% and also moved several products to 5%, it is important to pause and understand what is actually happening.
In 2025, the GST system moved towards slab simplification. In practice, the focus shifted away from 12% and 28% as the most common slabs, and more items moved into 5% or 18% buckets. That means a general nationwide “18% to 12% cut” is not the standard story for most categories.
Still, consumers do see price changes when goods or services shift from one slab to another. This guide explains how rate changes impact your purchases, how to calculate the difference, and how to plan your budget in a very simple way.
What Are the New GST Rates?
New GST rates refer to changes in the GST percentage applied to certain goods and services. These changes happen when the government shifts an item from one slab to another.
Common slabs people talk about are:
| Slab | Meaning |
|---|---|
| 5% | Lower GST, usually for more mass-use categories |
| 12% | Medium GST, now less common for many categories |
| 18% | Standard GST for many products and services |
A rate change can be:
- 18% to 12% which makes the item cheaper
- 18% to 5% which makes it much cheaper
- 12% to 18% which makes it costlier
- 5% to 18% which makes it significantly costlier
How the 18% GST Rate Change Affects Your Purchases
When an item moves from 18% to 12%, your tax reduces by 6%. That reduction can lower the final price, but the exact benefit depends on whether the seller passes it fully.
Goods and Services Affected by the 18% to 12% GST Reduction
There is no single fixed universal list you can apply without checking classification. Rate changes happen item wise based on classification, description, packaging, and use. So instead of naming specific items blindly, the best way to understand is to track the types of categories where 18% to 12% reductions usually happen when the government wants to lower tax burden but still keep a moderate rate.
Typical areas where such changes may occur are:
- Select consumer goods where the tax burden is considered high
- Specific industrial or intermediate products are used widely
- Services that have mass usage and where the government wants to reduce the cost of compliance
For your own purchases, the most practical method is:
- Look at your invoice GST rate now
- Compare it with what it was earlier
- If you see 12% where you earlier paid 18%, it means that item’s rate got reduced
How the 5% GST Rate Change Affects Your Purchases
A shift to 5% is usually more visible for consumers because the tax burden becomes much lower.
For example:
- On a base value of 1,000, GST at 18% is 180
- GST at 5% is 50
- Difference is 130, which is meaningful for many households
Items That Are Cheaper Due to the 5% GST Rate Change
When an item moves to 5%, it is usually because the government wants to reduce cost for mass buyers or essential use categories.
The types of items that often move towards 5% are:
- Daily use household categories
- Essential and mass consumption products
- Select health linked categories
- Some transport and food service categories under specific conditions
Again, the correct way to confirm is to check the GST rate printed in your invoice and match it with the current classification of that item.
Impact of GST Rate Changes on Consumer Spending
GST rate changes affect consumer spending in 3 main ways.
1) Final price changes influence buying decisions
If a product becomes cheaper, people buy more or upgrade earlier. If it becomes costlier, people delay purchase.
2) Big ticket items show bigger difference
The tax difference becomes more visible on:
- Electronics
- Appliances
- Furniture
- High value services
3) Essentials impact the monthly budget
If essentials move to lower slabs, it helps middle income families maintain monthly budgets.
Comparing the 18%, 12%, and 5% GST Rates
Here is a clear comparison table with the same base value so you can see the difference easily.
| Base Price | GST 5% | Final Price 5% | GST 12% | Final Price 12% | GST 18% | Final Price 18% |
|---|---|---|---|---|---|---|
| 100 | 5 | 105 | 12 | 112 | 18 | 118 |
| 1000 | 50 | 1050 | 120 | 1120 | 180 | 1180 |
| 10000 | 500 | 10500 | 1200 | 11200 | 1800 | 11800 |
| 50000 | 2500 | 52500 | 6000 | 56000 | 9000 | 59000 |
Tax difference table
| Tax Saving per 1,000 Base Value | Amount |
|---|---|
| 18% to 12% | 60 |
| 18% to 5% | 130 |
| 12% to 5% | 70 |
How to Calculate the Impact of New GST Rates on Your Purchases
Use these simple steps.
Step 1: Identify the base value
Look at the taxable value in your invoice. This is the amount before GST.
Step 2: Identify the GST rate
Check whether it is 5%, 12%, or 18%.
Step 3: Calculate GST
Formula:
Taxable value × GST rate
Step 4: Compare old vs new
If you know the earlier rate, compute both and compare.
Example calculation
You buy an item with taxable value 2,000.
- At 18%, GST is 2,000 × 18% = 360
- At 12%, GST is 2,000 × 12% = 240
- At 5%, GST is 2,000 × 5% = 100
Savings:
- 18% to 12% saves 120
- 18% to 5% saves 260
How to Adjust Your Budget for New GST Rates
Here are practical budget tips.
1) Track categories where you spend more
Make a short list:
- Groceries
- Eating out
- Fuel and travel
- Electronics
- Home upgrades
2) Watch invoices for GST rate changes
For one month, check the GST rate on your bills. You will quickly see which items moved.
3) Plan big purchases after understanding rates
If a category has moved to a lower slab, you may get better value. If a category moved higher, it may be better to delay or look for alternatives.
4) Consider hidden price changes
Sometimes sellers do not reduce the final price fully even when GST falls. They may adjust the base price. So focus on taxable value and GST separately.
Conclusion
New GST rates can make some goods and services cheaper and some costlier, depending on which slab they move into. A shift from 18% to 12% reduces tax burden moderately, while a shift to 5% reduces it significantly.
For consumers, the best habit is to check the GST rate printed on invoices, compare it with past bills, and track which categories are affecting your monthly expenses. For businesses, rate changes also affect pricing and ITC planning, so correct classification and invoicing become essential.
Jagdish Prasad is a Chartered Accountant with over 5 years of experience. He helps people and businesses with GST, income tax, and HSN codes. Jagdish makes sure his clients follow all tax rules and save money the right way. He also enjoys writing simple articles to help others understand taxes and stay updated with the latest rules.
Frequently Asked Questions
-
What Are the Main Changes in GST Rates from 18% to 12% and 5%?
The main change is slab shifting, where some items that were earlier taxed at 18% may move to 12% or 5% based on government rate decisions. This reduces the GST paid by consumers on those items.
-
How Do the New GST Rates Impact the Pricing of Everyday Goods?
If everyday goods move to 5% or 12%, final prices can reduce. But actual benefit depends on whether sellers pass on the full tax reduction or adjust base prices.
-
Can I Claim Input Tax Credit (ITC) on Items Affected by New GST Rates?
ITC is mainly relevant for businesses registered under GST. If you buy goods or services for business use and conditions are met, you can claim ITC even if the GST rate changes, unless the category has special restrictions.
-
What Is the Impact of GST Rate Changes on Luxury Goods?
Luxury goods can become costlier if moved to a higher slab or if additional taxes apply. If moved to a lower slab, they can become slightly cheaper, but such shifts are less common compared to essentials.
-
When Did the New GST Rates Take Effect?
GST rate changes apply from the notified effective date. If there were changes in 2025, the effective date depends on the official notification for that specific item or service category.
If you want, I can also make this blog more detailed by adding an item wise sample list for 5%, 12%, and 18% slab examples and a checklist to identify the correct GST rate from your invoices.