New GST Rates After September 2025: 5%, 18% and 40% Explained

The new GST rates after September 2025 rest on two main slabs, 5% (merit rate) and 18% (standard rate), with a 40% rate for a short list of luxury and sin goods and nil for essentials. The GST Council approved this at its 56th meeting on 3 September 2025, and it took effect on 22 September 2025, replacing the old 5%, 12%, 18% and 28% structure for almost all items. Tobacco products moved to 40% from 1 February 2026, when compensation cess on them ended.

New GST rates after September 2025: the structure

GST is charged on each supply of goods and services, and registered businesses take credit for the GST they pay on purchases. Until 21 September 2025, most items fell into one of four slabs: 5%, 12%, 18% or 28%. The Council’s rate rationalisation collapsed these into two main slabs:

• 5% for daily-use goods, many foods and medicines, and some services.
• 18% as the standard rate for most goods and services, including most professional and business services.
• 40% for a narrow list of luxury and sin goods.
• Nil for essentials and certain exempt services.

Most items that were at 12% moved down to 5%, and most at 28% moved down to 18%. A few moved up to 40%.

New GST rates after September 2025: examples

These are broad categories. The exact rate for a product depends on its classification and sometimes on conditions such as packaging or price. A shampoo and a medicated hair product, or a hotel room at ₹7,000 and one at ₹8,000, can fall under different entries.

Tobacco, pan masala and the end of compensation cess

Tobacco products did not move to the new structure on 22 September 2025. The old rates and GST compensation cess continued on them for some months. From 1 February 2026, the compensation cess ended, tobacco products and pan masala moved to the 40% GST rate, the Centre levied new central excise duties on tobacco, and a separate health cess was imposed on pan masala. If you sell these goods, the change affects both your invoices and your pricing; take a GST practitioner’s help.

New GST rates after September 2025: what shopkeepers must do

1. Update every item code in your billing software. Check the HSN or SAC and rate for each product against the current CBIC notification. An old price list is the most common source of wrong invoices.
2. Get the invoice right. Charge CGST and SGST in equal halves within your state, and IGST for supplies to another state.
3. Watch input tax credit. Some 5% services, such as beauty and physical well-being services, come without input tax credit. Check whether credit is allowed before you assume it.
4. Composition dealers. If you are under the composition scheme, you pay a flat rate on turnover and do not charge GST to customers, so the change reaches you mainly through purchase prices. See our guide on GST registration for small business for thresholds and composition.
5. File on time. Since the July 2025 tax period, the liability shown in GSTR-3B is auto-filled from GSTR-1 and cannot be edited there. Correct sales errors through GSTR-1A before filing GSTR-3B.

Example: Lakshmi runs a cosmetics and general store in Coimbatore. After 22 September 2025, her soap, shampoo and toothpaste lines dropped from 18% to 5%. She updated her billing codes the same week, and her B2B customers’ credit matched her invoices. Had she kept charging 18%, she would have had to correct invoices later and explain the excess to customers.

For consumers. If a shop charges an old, higher GST rate on an item that moved to 5%, ask for a corrected bill. A grievance can be raised on the National Consumer Helpline (1915).

Frequently asked questions

What are the new GST rates after September 2025?

From 22 September 2025, GST has two main rates: 5% for daily-use and essential items and 18% as the standard rate. A 40% rate applies to a short list of luxury and sin goods, and essentials such as roti and individual life and health insurance are nil. A few special rates, such as 3% on gold, continue.

Is 12% and 28% GST removed?

For almost all items, yes. Items at 12% mostly moved to 5% and items at 28% mostly moved to 18%, with a few moving to 40%. Tobacco products kept their old treatment until 1 February 2026, when they moved to 40%.

Is health insurance GST free now?

Individual life insurance and individual health insurance policies became exempt from GST from 22 September 2025; earlier they were at 18%. Group policies and other insurance products may be treated differently, so check your policy document.

What is the GST on small cars after the change?

Small cars, three-wheelers and motorcycles up to 350cc moved from 28% to 18% on 22 September 2025. Motorcycles above 350cc and large or luxury cars moved to 40%.

Where can I check the GST rate for my product?

Check the rate notifications published by CBIC and the GST rate finder on the official portals, using your product’s HSN code or your service’s SAC. A GST practitioner can confirm classification where the description is not clear.

Quick quiz

Learn the new GST rates after September 2025 alongside the new Income-tax Act: New Income-tax Act 2025 and GST Basics certificate course (a certificate of completion, not a qualification to act as a GST practitioner).

Sources

• Central Goods and Services Tax Act, 2017 and Integrated Goods and Services Tax Act, 2017
• Recommendations of the 56th GST Council meeting, 3 September 2025, and CBIC rate notifications effective 22 September 2025
• Notifications ending GST compensation cess on tobacco products and introducing the 40% rate, central excise duty and pan masala health cess, effective 1 February 2026
• CGST Act, s.22 and s.24 (registration), s.10 (composition)

This page is for education and general information, not tax or legal advice for a specific case. Check the current rate notification for your item and consult a chartered accountant or GST practitioner. Law as on 31 October 2026.