GST Rates in 2026: 5%, 18% and 40% Slabs After GST 2.0 Explained

Since 22 September 2025, GST in India runs on two main slabs — 5% for essentials and 18% for most other goods and services — with a 40% rate reserved for demerit products such as pan masala, tobacco and luxury vehicles. The old 12% and 28% slabs are gone. This guide maps the rate structure for 2026, lists the key GST 2.0 reclassifications, and shows how to confirm the exact rate for your product.

The Slab Structure After GST 2.0

The September 2025 rationalisation replaced the four-slab structure of 0-5-12-18-28 with three working bands — exempt, 5% and 18% — plus the 40% demerit rate. The 12% and 28% slabs stand abolished, and almost everything that sat in them has moved. Compensation cess, which earlier stacked on top of 28% items, has been folded into the 40% structure for most goods rather than charged separately.

What Became Exempt or Cheaper

The reclassification exercise pushed a long list of daily-use items into the 5% slab or out of tax entirely. The changes most taxpayers notice in 2026 are:

• Individual life and health insurance policies are now exempt from GST — a flagship change of the reform.
• UHT milk, paneer and Indian breads such as roti and paratha moved to the exempt list.
• Most household consumables earlier taxed at 12% moved down to 5%.
• Medical devices and oxygen dropped from 12% to 5%, easing healthcare costs.
• Gyms, salons, yoga and similar wellness services fell from 18% to 5%.
• Small cars, air conditioners and large televisions dropped from 28% to 18%, with their earlier cess absorbed into the new structure.
• Restaurants remain at 5% without input tax credit — this position is unchanged by the reform.

The 40% Demerit Slab and the Cess Transition

The 40% rate applies to products the GST Council treats as demerit: pan masala, tobacco products, aerated sugary drinks, luxury cars, yachts and private aircraft. For most of these, the earlier compensation cess was folded into the single 40% rate instead of being stacked on a separate base.

Tobacco was the exception on timing — cigarettes and certain tobacco products continued under the earlier arrangement temporarily and transitioned into the 40% structure later, so their effective rates were temporarily unchanged. Businesses in these categories should track the CBIC transition notifications closely, because the exact effective date per product matters for invoicing and credit.

How to Confirm the Right Rate for Your Product

Rates attach to HSN codes for goods and service accounting codes for services, so the practical route is to identify your code first and then read the notification that maps that chapter. Start with our HSN code finder, and verify the chapter against the latest CBIC notifications on the CBIC or GST portal. For pricing, remember GST is quoted over and above the taxable value: if your system stores tax-inclusive prices, the reverse GST calculator extracts the tax portion, while the standard GST calculator adds CGST, SGST or IGST to any base value.

What This Means for Invoicing in 2026

Businesses should update price lists, item masters and accounting software in step with the reclassifications, because quoting a slab that no longer exists (12% or 28%) will mismatch buyer-side credit claims and invite queries. Re-check that your HSN summary in GSTR-1 carries the correct codes and rates after the change. Where a product straddles categories — composite packs, bundled services — document the principal-supply logic you apply. When in doubt, a short consultation with a GST consultant costs far less than a rate-related notice.

Key Takeaways

• From 22 September 2025: two main slabs — 5% (merit) and 18% (standard) — plus a 40% demerit rate.
• The 12% and 28% slabs are abolished; compensation cess is folded into the 40% structure for most items.
• Life and health insurance, UHT milk, paneer and roti/paratha are exempt; cars, ACs and large TVs are at 18%; most household consumables, medical devices, gyms and salons are at 5%.
• Restaurants stay at 5% without ITC; cigarettes were temporarily unchanged pending the tobacco transition.
• Always confirm your HSN-specific rate against the latest CBIC notifications.

Frequently Asked Questions

What are the GST slabs after 22 September 2025?

The structure is 5% for merit goods and services and 18% as the standard rate, with 40% for demerit products. The earlier 12% and 28% slabs no longer exist, and several items moved to the exempt list.

Is GST really removed from health and life insurance premiums?

Yes. Individual life and health insurance policies became exempt from 22 September 2025, replacing the earlier 18% charge on premiums. Check whether your specific policy type falls within the individual-category exemption.

Which products attract 40% GST?

Demerit and luxury products: pan masala, tobacco products, aerated sugary drinks, luxury cars, yachts and private aircraft. The rate absorbs what was earlier compensation cess for most items.

Did restaurant GST change under GST 2.0?

No. Restaurants continue at 5% without input tax credit, exactly as before the reform. The rationalisation did not disturb the restaurant rate.

What rate applies to cigarettes now?

Cigarettes and certain tobacco products continued under the earlier compensation-cess arrangement for a transition period, so effective rates were temporarily unchanged, before moving into the 40% structure. Check the current CBIC notification before invoicing.

How do I find the GST rate for my specific product?

Identify the HSN code first, then check that chapter against the latest CBIC rate notifications. Our HSN code finder and GST calculators help you map the code and compute the tax on any value.

Disclaimer: Tax laws change frequently. Verify current rates and deadlines on the official portals (incometax.gov.in, gst.gov.in) or consult a qualified professional before acting.