India tax & salary
GST 2.0 Slabs Explained: What Changed in September 2025
8 min read · Reviewed 26 July 2026 · Ujjwal Technolabs
From 22 September 2025 India’s four main GST slabs became two: 5% and 18%, with a 40% demerit rate on a short list of sin and luxury goods. Most 12% items dropped to 5% and most 28% items to 18%. The old slabs still matter for reading older invoices.
What actually changed on 22 September 2025
GST launched in 2017 with four main rates — 5%, 12%, 18% and 28% — plus a compensation cess on the worst offenders. That structure created endless classification disputes, because the gap between 12% and 18% was worth arguing about on almost every product. GST 2.0, effective 22 September 2025, removed two of those rates from the main structure. The bulk of 12% goods moved down to 5%, the bulk of 28% goods moved down to 18%, and a single 40% demerit rate replaced the old 28%-plus-cess arrangement for sin and luxury categories.
For a buyer the practical effect is that most things got slightly cheaper, insurance got noticeably cheaper, and a narrow list got more expensive on paper. For anyone raising invoices, the practical effect is that you now need to know which side of 22 September 2025 a transaction sits on.
The rates you deal with now
| Rate | Status | Typical coverage |
|---|---|---|
| 0% / exempt | Current | Staples including UHT milk, paneer and Indian breads; individual life and health insurance premiums |
| 5% | Current — main lower rate | Most goods that used to sit at 12%, plus items already at 5% |
| 12% | Legacy | Needed only to verify invoices dated before 22 September 2025 |
| 18% | Current — main standard rate | Most services and most goods that used to sit at 28% |
| 28% | Legacy | Needed only to verify invoices dated before 22 September 2025 |
| 40% | Current — demerit rate | Pan masala, tobacco, aerated and caffeinated sugary drinks, luxury cars, yachts, betting and casinos |
Our GST calculator keeps all six in the dropdown for exactly this reason. If you are reconciling a financial year that straddles September 2025, you will need the legacy rates to tie out the earlier months.
CGST, SGST and IGST are the same money
The rate you look up is the total. How it is labelled depends on geography. An intra-state sale — seller and buyer in the same state — is split in half between Central GST and State GST. An inter-state sale carries the whole rate as Integrated GST, which is later apportioned between the Centre and the destination state.
On a ₹1,000 net supply at 18%, the calculator returns ₹180 of GST and a ₹1,180 gross. Sold within one state that appears as ₹90 CGST and ₹90 SGST; sold across a state border it appears as ₹180 IGST. The buyer pays ₹1,180 either way. This is the single most common confusion in GST, and it costs nothing to get right: never add CGST and SGST on top of the rate you looked up.
Extracting GST from a price that already includes it
This is where real money gets lost. If a bill says ₹5,900 including 18% GST, the tax inside it is not 18% of ₹5,900. You have to divide by 1.18, not subtract 18%.
| Method | Net | GST |
|---|---|---|
| Correct: ₹5,900 ÷ 1.18 | ₹5,000 | ₹900 (₹450 CGST + ₹450 SGST) |
| Wrong: 18% of ₹5,900 | ₹4,838 | ₹1,062 |
The error overstates the tax by ₹162 on a single ₹5,900 bill. If you claim input tax credit on that figure, you are claiming credit that does not exist. Tick Amount already includes GST on the GST calculator and it does the division for you — a ₹1,050 restaurant-style bill at 5% resolves to ₹1,000 net and ₹50 of GST, ₹25 CGST and ₹25 SGST.
What the rate cuts are worth in rupees
The headline “12% to 5%” sounds bigger than it is on small purchases and smaller than it is on large ones. Two examples from the calculator, holding the pre-tax price constant:
| Net price | Old rate and gross | New rate and gross | Saving |
|---|---|---|---|
| ₹2,000 | 12% → ₹2,240 | 5% → ₹2,100 | ₹140 |
| ₹40,000 | 28% → ₹51,200 | 18% → ₹47,200 | ₹4,000 |
One caveat worth holding onto: a rate cut only reaches you if the seller passes it on. If a retailer keeps the shelf price the same after a 28% to 18% move, the net price has quietly risen from ₹40,000 to ₹43,389.83 and the saving has gone to the seller. Working backwards from the MRP with the inclusive setting is the fastest way to see whether that happened.
The 40% demerit rate
The demerit rate is deliberately narrow: pan masala, tobacco products, aerated and caffeinated sugary drinks, luxury cars, yachts, and betting or casino services. On a ₹1,00,000 net supply it produces ₹40,000 of GST and a ₹1,40,000 gross, split as ₹20,000 CGST and ₹20,000 SGST on an intra-state sale.
Because 40% replaces the earlier 28%-plus-cess treatment rather than adding to it, the total burden on many of these items did not change dramatically — the structure got simpler, not the price. If anything outside that list is billed to you at 40%, ask for the HSN or SAC code and check the classification.
Auditing an invoice in four checks
Most GST disputes on a single bill come down to four things, and you can check all of them without software.
- Date of the invoice. Anything dated on or after 22 September 2025 should be on the new structure. If a September or October 2025 invoice still shows 12% or 28%, that is worth querying — and if you are reconciling a full financial year, expect the same product to legitimately carry two different rates across it.
- Rate against the HSN or SAC code. The rate follows the classification, not the seller’s habit. A supplier who did not update their master data will keep billing the legacy rate until someone tells them. The code is the thing to verify; the rate is downstream of it.
- Tax lines match the transaction type. Same state should show CGST and SGST at half the rate each; different states should show a single IGST line at the full rate. A bill with all three lines, or with CGST and SGST on an inter-state supply, has a data-entry problem.
- The arithmetic ties. Net plus tax should equal the total, and the tax should equal the net times the rate. Retype the net and the rate into the GST calculator and compare — this catches the inclusive-versus-exclusive mix-up, which is by far the most common error on manually prepared bills.
Exempt is not the same as zero-rated
When a supply is exempt, no GST line appears on the invoice — but the seller also cannot claim input tax credit on what they spent to make it. That blocked credit becomes a cost, and part of it usually finds its way into the price. This matters most for the insurance change: removing 18% from an individual health or life premium is a real saving, but the premium may not fall by the full 18% once the insurer absorbs lost credit.
If you claim health premiums under Section 80D, the GST exemption and the deduction interact. A lower premium means a smaller 80D claim, which slightly reduces the old regime’s advantage. Our old vs new tax regime guide shows how much your deduction stack has to reach before the old regime pays at all.
Why the same rate feels different to a buyer and a business
For a salaried consumer, GST is a straight cost: the 18% on a laptop is 18% less purchasing power. For a registered business buying the same laptop for business use, the 18% is recoverable as input tax credit against the GST it charges its own customers, so the real cost is the ₹40,000 net, not the ₹47,200 gross. This is why business quotes are usually stated exclusive of GST and retail prices inclusive — the two audiences are looking at genuinely different numbers.
It also explains why the September 2025 cuts matter more to households than to companies. A rate reduction hands real money to anyone who could not claim credit — consumers, exempt suppliers and composition-scheme dealers — while for a fully creditable business it mostly changes working-capital timing. If you are comparing a retail price with a business quote, settle which side of that line each figure sits on before you conclude one is cheaper.
What our calculator does — and does not — do
The tool takes an amount and a rate, adds or extracts the GST, and shows the equal CGST and SGST halves alongside the net and gross. Everything runs in your browser; nothing is uploaded. It keeps two decimal places and does not round the invoice total to the nearest rupee, so ₹1,499 at 18% gives ₹269.82 of GST, a ₹1,768.82 gross and ₹134.91 in each of CGST and SGST. Accounting software that rounds the final total will differ by up to a rupee.
It does not look up rates by HSN or SAC code, apply reverse charge, handle composition-scheme turnover, split IGST apportionment between states, or track input tax credit. It is an arithmetic tool for a rate you have already established, not a classification tool.
GST is a tax on what you spend; the tax on what you earn works differently. For that side, see our guides on the old versus new income tax regime and on CTC versus take-home salary.
These are planning estimates, not tax advice. Rates and classifications change through notifications and Council decisions, and everything above reflects the position as of July 2026. For a filing, a credit claim or a rate dispute, confirm the HSN classification with a chartered accountant or against the CBIC notification that applies to your supply.
Tools in this guide
Frequently asked questions
- Do the 12% and 28% slabs still exist?
- They are legacy rates. From 22 September 2025 the main structure is 5% and 18%, with most 12% goods moved down to 5% and most 28% goods down to 18%. You still need both old rates to check invoices, credit notes and returns dated before 22 September 2025, which is why our calculator keeps them in the dropdown.
- What falls under the 40% demerit rate?
- A deliberately short list of sin and luxury items: pan masala, tobacco products, aerated and caffeinated sugary drinks, luxury cars, yachts, and betting or casino services. It replaces the old 28% plus compensation cess arrangement for these categories. Everyday goods are not in this bracket, so if a seller quotes 40% on ordinary supplies, ask for the HSN code.
- Is CGST plus SGST more expensive than IGST?
- No — the total is identical. On an intra-state sale the tax is split into Central GST and State GST, half each, so 18% becomes 9% plus 9%. On an inter-state sale the whole 18% is charged as IGST and later apportioned between the Centre and the destination state. Your invoice total is the same either way; only the tax lines differ.
- How do I work out the GST inside a price that already includes it?
- Divide, do not subtract. Net equals gross divided by 1 plus the rate, so a ₹5,900 inclusive bill at 18% is ₹5,000 net plus ₹900 GST. Taking 18% of ₹5,900 gives ₹1,062, which overstates the tax by ₹162 and leaves a net of ₹4,838. Tick the inclusive box on our GST calculator to get it right.
- Are insurance premiums really GST-free now?
- Individual life and health insurance premiums are exempt under the September 2025 changes, so the 18% that used to sit on top of a retail policy premium is gone. Note that exempt is not the same as zero-rated: the insurer cannot claim input tax credit on an exempt supply, so a small part of the tax can still reach the price indirectly.
- Which food items are at 0% or exempt?
- The exempt and nil-rated list covers staples including UHT milk, paneer and Indian breads. Being on that list means no GST line appears on the invoice at all. Prepared and packaged foods are treated separately from raw staples, so check the specific HSN classification rather than assuming a whole aisle is exempt.
- Does the GST calculator handle rounding the way my accounting software does?
- It keeps two decimals and does not round the invoice total to the nearest rupee. For example ₹1,499 at 18% gives ₹269.82 GST and a ₹1,768.82 gross, split as ₹134.91 CGST and ₹134.91 SGST. Many billing systems round the final total, so expect differences of a rupee or less against a printed invoice.