GST Rates in India 2025: Updated List of Tax Rates
Introduction
Ever wondered why your ₹100 shampoo suddenly costs ₹105? Or any food essentials suddenly dropped in price? That extra ₹5 is your GST, and all the rates just changed. No need to worry because these changes benefit you and do not burden you. On 22 September 2025, the government revised these tax slabs to simplify the system and make everyday goods more affordable. 5% for everyday essentials, 18% for standard goods, and 40% for luxury and sinned goods.
Remember these three numbers and you’ll instantly know which GST rate applies to what. This guide breaks down everything about the new GST rates in simple terms, what changed, why it matters, and how to stay compliant.
What is GST and Why Does It Matter?
GST stands for Goods and Services Tax, a single, nationwide tax that replaced multiple indirect taxes like VAT, excise, and service tax. Before GST, each state had its own tax system, creating confusion and double taxation. The introduction of GST rates simplified the structure by combining all indirect taxes into one unified system.So instead of paying different taxes at every stage of production and sale, there’s now one tax divided into different slabs based on the type of product or service.
The New GST Rates / Tax Slabs effective from 22 September 2025
| GST Slab | Type of Goods/Services | Examples |
| 0% (Nil) | Essentials and life-saving items | Fresh fruits, vegetables, grains, and certain medicines |
| 5% | Everyday essentials | Edible oils, packaged food, footwear under ₹2,500, basic hygiene products |
| 18% | Standard goods and services | Mobile phones, electronics, household appliances, and clothing above ₹2,500 |
| 40% | Luxury and sin goods | Cigarettes, tobacco, luxury cars, and aerated drinks |
These new GST rates replace the earlier 12% and 28% slabs to simplify billing and make compliance easier.You can view the complete list of new GST rates and the changes at https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2163555
Why were GST rates revised in 2025?
The government revised GST rates in India in 2025 to make the system easier for both businesses and consumers.
Here’s what prompted the change:
- Simplification: The old 5-slab structure (0%, 5%, 12%, 18%, 28%) was complicated. The new one is cleaner.
- Affordability: Everyday goods are cheaper as some items have moved to lower tax rates.
- Fairness: Luxury and harmful goods are now taxed more heavily, keeping the burden off essential products.
- Ease of Compliance: Accounting software can now manage GST filing more easily with fewer rates.
How do the new GST Rates affect you and your businesses?
For Consumers
- Lower costs: Common items like soaps, snacks, and clothing are now under 5%.
- Clearer billing: You’ll see only two or three tax categories on bills instead of five.
- Transparency: Every product now has a visible tax component, no hidden state taxes.
For Businesses
- Prices of essentials may drop: Items like soaps, textiles, stationery, and cement moved to lower GST slabs (5% or 12%), so consumer goods and basic materials get cheaper.
- Luxury items cost more: High-end goods now attract a 40% GST slab.
- Businesses need to rework pricing and systems: Update HSN codes, billing, and ERP to match new slabs and avoid compliance issues.
- Cash flow: Lower GST on inputs eases cash flow by reducing the amount of tax locked in inventory and input credits.
Comparison: Old vs New GST Slabs
| Item Category | Old GST Rate | New GST Rate (2025) | Impact |
| Processed food | 12% | 5% | Cheaper |
| Mobile phones | 18% | 18% | No change |
| Luxury watches | 18% | 18% | No Change |
| Life Saving Medicines | 5% | 0% | Cheaper |
| Electronic appliances | 28% | 18% | More affordable |
| Packaged snacks (biscuits, chips) | 12% | 5% | Cheaper |
| Milk and dairy products | 5% | 0% | Cheaper |
| Restaurant services | 5% | 5% | No change |
| Furniture | 28% | 18% | More affordable |
| Cement | 28% | 18% | Cheaper for builders |
| Automobiles (small cars) | 28% + cess | 18% | More affordable |
| Two-wheelers | 28% | 18% | Cheaper |
| Air conditioners | 28% | 18% | Cheaper |
| Hotel stays (₹1,000–₹7,500/night) | 12% | 5% | Cheaper |
| Luxury hotels (above ₹7,500/night) | 18% | 18% | No change |
| Clothing (below ₹1,000) | 5% | 5% | No change |
| Clothing (₹1,000-₹2,500) | 12% | 5% | Cheaper |
| Beauty & personal care | 18% | 5% | Cheaper |
| Jewellery & gold | 3% | 3% | No change |
| Construction materials (tiles, paint, etc.) | 28% | 18% | More affordable |
| Flights (economy) | 5% | 5% | No change |
| Flights (business class) | 12% | 18% | Costlier |
| Health and Term Insurance Premium | 18% | 0% | Cheaper |
| Online education services | 18% | 18% | No Change |
| EVs (Electric Vehicles) | 5% | 5% | No change |
| Fast food chains | 18% | 5% | Cheaper |
| Packaged water | 18% | 5% | Cheaper |
| Handicrafts | 12% | 5% | Cheaper |
The government’s goal is clear: simplify taxation and reduce prices for essential and middle-income goods while keeping luxury consumption taxed higher.
How can businesses adapt to this change in rates?
Here’s what small businesses should do to stay updated:
- Upgrade billing systems: Ensure the accounting software supports the new GST rates.
- Train staff: Make sure employees understand which tax slab applies to each item.
- Check inventory: Goods purchased under old rates but sold under new ones need special adjustment.
- Revise invoices: Update the tax rates in your invoice template and ensure clarity for customers.
- Stay informed: Follow GST notifications or updates on the official GST portal – gst.gov.in
Benefits of the New GST Structure
- Simplicity: Fewer tax slabs mean fewer calculation errors.
- Transparency: Every invoice clearly shows what is the rate of GST applied.
- Business-Friendly: Easy integration with accounting software and ERP systems.
- Consumer Savings: Lower GST rates on essentials make daily life more affordable.
- Boost to Compliance: With clearer rates, fake billing and tax disputes are reduced.
With the new GST rates in place, keeping your billing and tax records accurate has never been more important. This is where Vyapar, one of the best accounting software for small businesses, can make a real difference. It automatically updates your invoices with the latest GST tax rates and slabs, generates accurate reports, and helps you file returns without errors. Whether you sell everyday goods taxed at 5%, standard products at 18%, or luxury items at 40%, Vyapar ensures every bill reflects the correct rate. It’s a simple, reliable way to stay compliant and focus on running your business smoothly.
Conclusion
The new GST rates bring a simpler and more logical structure 0%, 5%, 18%, and 40%.
Every Indian, whether a student learning economics or a small business owner managing bills, benefits from this transparency. By updating your systems and understanding the new GST rates, you can make better pricing decisions, stay compliant, and save time.
If you use modern accounting software, these changes are easy to adopt, and your system can automatically calculate and apply the right tax rates and tax slabs for each transaction.
Frequently Asked Questions (FAQs)
- What happens to goods sold before the new rates started?
Invoices raised before 22 September 2025 continue under the old GST structure. However, any billing, supply, or payment made after that date must follow the new rates. Businesses must carefully track the “time of supply” to avoid mismatched entries in GSTR-1 and GSTR-3B during the transition period.
- What is the effect on essential goods?
Most essential goods, food grains, medicines, milk, and basic toiletries are now taxed at 0% or 5%. This shift directly lowers consumer costs and reduces inflation on everyday items. The GST Council’s goal was to protect low-income households and promote affordability while simplifying compliance for businesses selling daily-use products.
- How do I check which rate applies to my product?
You can easily verify the applicable GST rate in one of these ways: Visit the official GST portal gst.gov.in and search by HSN code. Check your invoice or purchase bill, where the HSN/SAC code and GST rate must be printed.
- Do these tax slabs apply to all states?
Yes. GST is a nationwide indirect tax, which means these new rates apply uniformly across all Indian states and Union Territories. Both Central GST (CGST) and State GST (SGST) are levied together, but the rate structure remains the same everywhere. For interstate sales, Integrated GST (IGST) is still charged using the same rate slabs. So whether you operate in Delhi, Karnataka, or Assam, the applicable GST rate for a given product or service remains identical.
- I run a small business. What should I do?
If you’re a small business owner, here’s what to do to stay compliant: first, update your accounting and billing software to reflect the new GST rates. Check your product list and ensure each item has the correct HSN code and updated tax rate. Revise your pricing to account for the reduced or revised GST rate; it might help you stay competitive. File your GST returns (GSTR-1, 3B, etc.) carefully in the first few months after the transition, as this is when errors often occur.
