GST Calculator India — GST 2.0 Rates 2025-26

GST 2.0 — How the New Four-Slab Structure Works (Effective 22 September 2025)

The 56th GST Council meeting on 22 September 2025 replaced India's original five-slab GST structure (0%, 5%, 12%, 18%, 28%) with a rationalised four-slab system. The 12% and 28% slabs are abolished for most goods. The changes reduce the tax burden on consumer goods and simplify compliance, while maintaining revenue through a 40% tier for true luxury and demerit goods.

GST 2.0 — four standard tiers:

Special rates (unchanged by GST 2.0):

• Gold: 3% (plus 5% on making charges)
• Gems and jewellery (cut/polished diamonds, precious stones): 0.25%
• Under-construction residential property: 5% (with no ITC; until Occupation Certificate)
• Affordable housing under construction: 1%

Tobacco — transitional arrangement: Cigarettes, beedis, pan masala, gutkha, and other tobacco products do NOT yet move to 40%. These continue under the old 28% GST + Compensation Cess regime until the GST compensation loan repayment obligation of states is discharged. A subsequent GST Council notification will formally move these to 40%. The transition timeline is linked to state compensation loan repayments — expected but not yet concluded as of June 2026. Apply 28% + Compensation Cess to tobacco products until the official gazette notification appears at cbic.gov.in.

CGST and SGST split: For intra-state supply, total GST is split equally: CGST (to Centre) + SGST (to state). At 18%: CGST 9% + SGST 9%. At 40%: CGST 20% + SGST 20%. For inter-state supply: IGST = full rate. UTGST replaces SGST for Union Territories.

Input Tax Credit (ITC — unchanged by GST 2.0): GST-registered businesses can set off GST paid on business inputs against output GST liability. ITC not available for: personal consumption, blocked credits under Section 17(5) (food/beverages for personal consumption, personal motor vehicles, club memberships), or when the supplier has not filed GSTR-1.

Verification is mandatory: The GST 2.0 reclassification is comprehensive — specific HSN/SAC codes may have moved across tiers. Always verify the current rate for a specific good or service at cbic.gov.in using the HSN/SAC code before invoicing. The tier descriptions above are directional; the gazette notification and CBIC rate schedule are authoritative.

Three GST 2.0 Calculations — Service Invoice at 18%, Consumer Durable (Old 28% → Now 18%), and Luxury Goods at 40%

Scenario 1: Prathap, IT consultant, invoices ₹1,20,000 for software development

Prathap is GST-registered. Client is in the same state (Maharashtra). IT and software services: 18% (unchanged under GST 2.0 — services remain at 18%).

GST: CGST 9% = ₹10,800. SGST 9% = ₹10,800. Total GST: ₹21,600. Invoice total: ₹1,41,600. Prathap deposits ₹21,600 after deducting ITC on inputs. B2B client claims ₹21,600 as ITC — no net GST cost to the business.

TDS: client deducts 10% under Section 194J on the ₹1,20,000 base (not on GST component, when GST is separately stated). This scenario is completely unchanged by GST 2.0 — services remain at 18%.

Scenario 2: Aryan buys a 1.5-ton split AC — the old 28% rate becomes 18%

Before 22 September 2025 (old rate): Split AC at ₹45,000 base. GST 28%: ₹12,600. Invoice: ₹57,600.

After 22 September 2025 (GST 2.0): Same AC. GST 18%: CGST 9% = ₹4,050. SGST 9% = ₹4,050. Total GST: ₹8,100. Invoice: ₹53,100. Consumer saving: ₹4,500 per unit — the direct benefit of the 28%→18% shift for consumer durables.

Other items moved from 28% to 18% under GST 2.0: televisions (above 32 inches), washing machines, refrigerators, most passenger cars and SUVs (mid-segment), consumer appliances. The net effect across most consumer electronics and appliances is a 10-percentage-point GST rate reduction, translating to 7–8% lower effective price for end consumers.

Scenario 3: Meera buys a high-value luxury watch — the new 40% tier

Meera purchases a luxury watch priced at ₹8,00,000 (ex-duty). The watch falls under a luxury goods HSN code now in the 40% tier under GST 2.0 (verify specific HSN at cbic.gov.in).

GST at 40%: CGST 20% × ₹8,00,000 = ₹1,60,000. SGST 20% × ₹8,00,000 = ₹1,60,000. Total GST: ₹3,20,000. Invoice total: ₹11,20,000.

Under the old regime, this item may have attracted 28% GST (₹2,24,000) plus Compensation Cess. Under GST 2.0, the 40% is a unified rate — for items that have completed the GST 2.0 transition, there is no separate cess layer in addition to the 40%. The total effective rate is 40%, applied as CGST 20% + SGST 20% for intra-state transactions.

GST Registration, Returns, Composition Scheme, and GST 2.0 Transition Compliance

GST registration thresholds (verify current at gst.gov.in): Mandatory for annual turnover above ₹40L for goods (₹20L for special category states); ₹20L for service providers (₹10L for special category states). E-commerce sellers: register regardless of turnover. These thresholds are unchanged by GST 2.0 — verify current figures as the GST Council has previously revised them.

HSN/SAC reclassification compliance: The GST 2.0 reform involved comprehensive reclassification. Businesses must update GST rate masters in ERP/accounting systems after 22 September 2025. Applying the old 12% or 28% rates after the effective date generates incorrect invoices and may constitute short or excess collection of GST. CBIC has published an updated rate notification — cross-reference all active HSN/SAC codes at cbic.gov.in.

Insurance premium GST exemption from 22 September 2025: Individual life insurance and health insurance premiums are now 0% GST. Insurers must update billing systems. Policyholders renewing after 22 September 2025 should see 0% GST on their premium notice. If an insurer's system still shows 18%, the renewal may have been processed before the effective date or the system has not been updated — raise a query with the insurer.

Composition Scheme (unchanged by GST 2.0): Eligible businesses (below turnover threshold — verify at gst.gov.in) can pay flat rates: 1% for traders/manufacturers, 5% for restaurants, 6% for service providers. Cannot collect GST from customers, issue tax invoices, claim ITC, or supply inter-state. Suitable for small B2C businesses with local customers.

GST returns (unchanged by GST 2.0): GSTR-1 (outward supply details — monthly or quarterly), GSTR-3B (monthly summary and payment), GSTR-9 (annual return). Late filing: ₹200/day. Interest: 18% per annum on delayed tax payment. ITC claims in GSTR-3B must match GSTR-2B (auto-populated from suppliers' GSTR-1). Suppliers who haven't filed GSTR-1 will not appear in GSTR-2B — ITC cannot be claimed for those purchases even if payment was made.

Tobacco products — what to invoice until further notice: Cigarettes, beedis, pan masala, and tobacco products continue under the old 28% + Compensation Cess structure. Do not apply the new 40% rate to these products. Watch for a formal GST Council notification or CBIC circular — this will be issued when the state compensation loan repayment is complete. The anticipated move to 40% (without the cess) will significantly simplify tobacco GST compliance but is not yet effective.

GST 2.0 Compliance Mistakes — Old Rates After Sept 2025, Tobacco Error, and Insurance Billing

Continuing to apply 12% or 28% rates after 22 September 2025. The 12% slab is abolished and the 28% slab is abolished for most goods. Businesses with pre-configured GST rate masters in accounting software must update these immediately. A supplier who raises a 12% invoice for an item now reclassified to 5% has over-collected tax — the over-collected amount must be deposited (not refunded as credit to the customer) and the customer cannot claim ITC on the inflated rate. Conduct a full review of your GST rate master against the revised CBIC notification before invoicing any goods after 22 September 2025.

Applying 40% to tobacco before the official notification. This is the most critical transition error. Tobacco products are explicitly preserved in the 28% + Compensation Cess arrangement until the state compensation obligation is cleared. Applying 40% to cigarettes or tobacco products creates an incorrect invoice that does not match the applicable rate — neither the tax authority nor the buyer's ITC system will accept it correctly. Confirm tobacco rates at cbic.gov.in and only apply 40% after the formal gazette notification.

Not updating insurance premium invoicing to reflect the 0% exemption. From 22 September 2025, individual life and health insurance premiums attract 0% GST. Insurance companies that continue to bill 18% on premiums after this date are over-collecting tax. Policyholders should check renewal invoices from Q4 2025 onward — an 18% GST charge on a post-September individual policy renewal is incorrect. Raise a dispute with the insurer if this occurs; the overpaid GST cannot be claimed as ITC by the individual policyholder and represents a direct out-of-pocket loss.

Claiming ITC on blocked categories at the new 40% tier. The 40% rate applies to luxury goods. ITC remains blocked under Section 17(5) for personal motor vehicles, food and beverages for personal consumption, and club memberships — regardless of the GST rate. A business that buys a 40%-rated luxury good for personal use cannot claim the 40% GST as ITC. The rate tier does not change the ITC eligibility rules. Verify whether a purchase is for business or personal use before claiming ITC on high-value 40% tier purchases.