Published: 4 September 2025 · Updated: October 2026 · Author: Abhishek Kumar Jha
The 56th meeting of the GST Council, held in New Delhi on 3 September 2025, approved the biggest rate reform since GST began, popularly called GST 2.0. The four main slabs (5%, 12%, 18%, 28%) were rationalised into two: 5% and 18%, with a special 40% rate for luxury and sin goods. The new rates came into force on 22 September 2025.
🗣️ Saral bhasha mein samjhein
- 3 September 2025 ki 56th GST Council meeting mein GST 2.0 aaya. Ab mukhya rate sirf 5% aur 18% hain, aur luxury/sin goods par 40%.
- 12% aur 28% wale slab lagbhag khatam ho gaye hain. Naye rate 22 September 2025 se lagu hain.
- Saste hue: chhoti car, AC, TV, cement (18%), shampoo, toothpaste, saabun, butter, ghee (5%). Individual life aur health insurance par ab GST nahi hai.
- Tobacco aur pan masala par 1 February 2026 se 40% GST hai, aur compensation cess khatam ho gaya hai.
- Business wale apne billing software mein HSN aur rate update karein, aur ghata hua rate customer tak pahunchayein.
📲 Sawal hai? WhatsApp karein: 8051331315
1. The New Rate Structure
- 5% (merit rate): essentials and common-use items
- 18% (standard rate): most goods and services
- 40% (special rate): luxury and sin goods, such as larger cars, motorcycles above 350 cc, aerated and sugar-added drinks, yachts and private aircraft, and from 1 February 2026, tobacco products and pan masala
- Nil rate on many essentials, and special rates of 3% (gold, silver, jewellery) and 0.25% (diamonds) continue
2. Key Relief for Consumers
| Item | Old rate | New rate |
|---|---|---|
| Small cars (petrol ≤1200 cc / diesel ≤1500 cc, length ≤4 m) | 28% + cess | 18% |
| Motorcycles up to 350 cc | 28% | 18% |
| Air conditioners, TVs, dishwashers | 28% | 18% |
| Cement | 28% | 18% |
| Hair oil, shampoo, toothpaste, toilet soap | 18% | 5% |
| Butter, ghee, cheese, namkeen, pasta, chocolates | 12% / 18% | 5% |
| UHT milk, pre-packaged paneer, chapati/roti/paratha | 5% / 18% | Nil |
| Medicines (general) | 12% | 5% |
| 33 life-saving drugs | 12% | Nil |
| Tractors and farm machinery | 12% | 5% |
| Individual life and health insurance | 18% | Nil |
| Hotel rooms up to ₹7,500 per day | 12% | 5% (without ITC) |
| Gyms, salons, barbers, yoga centres | 18% | 5% (without ITC) |
3. Implementation Timeline
- 22 September 2025: new rates on services and on all goods except tobacco items; Compensation Cess removed on these goods.
- 1 February 2026: pan masala, gutkha, cigarettes, chewing tobacco (zarda), unmanufactured tobacco and similar products moved to 40% GST, and Compensation Cess on tobacco ended, with separate Central levies (additional excise duty on tobacco and a health cess on pan masala) introduced.
What Businesses Should Check
- Correct HSN/SAC and rate in your billing software for every item. See our updated HSN & SAC rate list.
- Rate-cut items moving to 5% may create an inverted duty structure: review your ITC and consider a refund under Section 54(3).
- Services moved to 5% “without ITC” (hotels ≤₹7,500, salons, gyms) mean input credit can no longer be claimed on related purchases.
- Pass on the rate reduction to customers through revised MRP and price lists.
Need help moving your business to the new rates? Call/WhatsApp +91 8051331315 or email gstfolio@zohomail.in.
Need help? Call/WhatsApp +91 80513 31315 or email gstfolio@zohomail.in.