How Much is GST Percent in India? Everything You Must Know in 2026

If you ask a group of 10 retail shop owners about the applicable GST for their goods, you will probably hear approximately eight different levels of taxation. At least two local business owners will have a definitive answer, yet only one will give an accurate answer, and that’s no joke, because this is business second nature among large numbers of businesses throughout India on Tuesday mornings.

It has been five years since GST was introduced in India (2017), but consumers are still unsure how to determine the correct GST for goods purchased.  In the early years after the introduction of GST in India, there were multiple instances where consumers were unsure whether GST would be charged on products purchased.

If you have been wanting to understand how GST rates are structured, how they have been modified, and how these changes will impact either your business or your purchasing decisions, then this post should be used as a reference.

What Is GST and Why Do the Rates Even Matter?

In terms of India’s taxation system, when the Goods & Services Tax (GST) was introduced as a single consolidation system to replace several indirect taxes (e.g., Excise duty, VAT, Service tax, Octroi and entry taxes), the main objective for implementing the GST has been “One country, One tax, One rate per item sold, wherever purchased throughout India”, and the implementation date was July 01, 2017. 

GST is charged at multiple points in the supply chain. For example, GST is charged when raw materials are shipped from the supplier to the manufacturer. When finished goods move from the manufacturer to a distributor, GST is charged again. When a retailer sells to the end consumer, GST is charged one more time. But because each player in the chain can claim input tax credit (ITC) on the GST they paid at the previous stage, the actual tax burden doesn’t compound; it flows forward and gets settled at each step.

The rate, though, matters enormously. At 5%, the tax on a ₹1,000 product is ₹50. At 18%, it’s ₹180. At the new 40% luxury rate, it’s ₹400. Get the rate wrong on your invoices even by one slab, and the downstream consequences can include blocked ITC, compliance notices, and buyer disputes. Having a cloud based accounting software can help you in understanding the appropriate GST percentage for the goods/services you provide in India is vital and affects many variables, such as your ability to set pricing, obtain an appropriate margin, and maintain compliance.

The Big Change: What GST 2.0 Actually Did

The GST (Goods and Services Tax) was restructured in India on September 3, 2025. The 56th GST council met under the chairmanship of Nirmala Sitharaman, India’s Minister of Finance, to make these sweeping changes. This new GST system has been referred to by the Government of India as GST 2.0. From the 22nd of September 2025, the GST tax would be charged at various rates; namely: 5%, 12%, 18%, and 28%.There was an overall simplification of the GST system from the perspective of the consumer, from the point of view of businesses, and a significant reduction in the cost of everyday consumer items. Plus various cess additions on top of the 28% slab for sin goods. The 12% slab, in particular, had been a long-standing source of confusion; many similar products fell on either side of 12% and 18% for no obvious reason, and businesses frequently got it wrong.

The 56th Council cleaned that up. Here’s what actually happened:

Almost all items that used to be in the 12% slab 99% of them, to be precise moved down to 5%. And 90% of items in the 28% slab moved down to 18%. A brand new 40% slab was created specifically for sin goods and luxury products, think tobacco, pan masala, sugary aerated drinks, luxury SUVs, where the older 28% plus cess arrangement got consolidated into a single cleaner rate.

The result? India’s GST structure in 2026 effectively runs on three functional slabs: 5%, 18%, and 40%, with 0% for essentials. Using a cloud based accounting software makes it simpler for consumers, less complicated for businesses, and results in a meaningful cost reduction on everyday goods.

GST Percent in India: The Current Slab Structure (2026)

In this section, we are giving the GST Percent in India regarding the current slab structure. 

0% – Things the Government Decided You Shouldn’t Pay Tax On

Fresh vegetables. Eggs. Milk. Rice, wheat, pulses. Books, newspapers. Most unprocessed food grains. Healthcare services. Education. Legal services provided to individuals.

The logic is straightforward; these are things that every Indian needs regardless of income level, so taxing them would disproportionately hurt the poorest households. No tax.

A notable addition under GST 2.0: life insurance and health insurance premiums are now at 0%. Previously taxed at 18%, this was one of the most talked-about changes from the September 2025 reforms. Buying a term plan or a health cover got meaningfully cheaper overnight.

Dairy products like UHT milk and paneer have also been fully exempt. So did pizza bread, parathas, and roti, which had created some genuinely absurd situations before (a plain roti was exempt, a branded roti wasn’t, depending on how it was packaged).

5% – Essentials That Aren’t Quite Free

This is the merit slab. Things people need but that aren’t in the most basic necessity category.

Coffee, tea, edible oils, packaged food items, medicines and drugs, footwear below a certain price point, small cars (petrol under 1200cc, diesel under 1500cc, length under 4 metres — GST came down from 28% to 18%… wait, actually small cars moved to 18%), agricultural equipment, tractors, drip irrigation equipment, fertilisers.

FMCG sachets priced at ₹10 or below things like shampoo sachets, small toothpaste tubes — also moved to this slab from the previous 12%.

For businesses, the 5% slab typically means thinner ITC chains. The tax isn’t high enough that people get excited about claiming it back, but it still needs to be tracked correctly.

18% – Where Most of Business India Lives

This is the workhorse slab. The one that probably applies to whatever your business sells or buys most of the time.

Software and IT services. Increased air-conditioned restaurants, ₹7,500 hotel rooms, electronic devices such as laptops, phones and televisions, and white goods such as air conditioners, refrigerators and washing machines all dropped from 28% to 18% in GST 2.0. Cement. Construction materials. Financial services. Telecom services. Professional services (CA fees, consulting, advertising).

If you run a service business in India, there’s a very good chance your invoices go out at 18% GST. And if you buy most of your inputs for business use, a good chunk of them will also be at 18%, which means your ITC flow is mostly at this rate.

40% – The New Sin Slab

This is the new one, and it applies to a specific and intentional list of goods that the government has decided should be taxed heavily, partly to discourage consumption, partly because the people buying them can absorb the cost.

Tobacco products. Pan masala. Aerated and sweetened drinks (carbonated beverages, sugary drinks). High-end luxury cars and SUVs. Premium motorcycles above 350cc.

Previously, these items sat in the 28% slab with an additional compensation cess piled on top, which made the effective rate higher anyway but messier to calculate. The 40% slab consolidates that into one clean number.

If your business deals in any of these categories, and many distributors and retailers do this is the number you need to know cold.

CGST, SGST, IGST – What Do These Actually Mean?

Every time you look at a GST invoice, you’ll see these three terms. Here’s what they are.

CGST — Central GST. Goes to the central government.

SGST — State GST. Goes to the state government where the transaction happens.

IGST — Integrated GST. Applies when goods or services cross state lines.

The ratio of purchase and sales tax when making purchases and/or sales in a state. An 18% GST transaction made in Maharashtra (e.g. 9% Central Government Tax CGDT; 9% State Government Tax SGDT); for example, a purchase made in Maharashtra will be recorded on your invoice as 9% Central Government Tax CGDT and 9% State Government Tax SGDT. 

But the moment that transaction crosses a state border, say you’re a distributor in Delhi selling to a buyer in Tamil Nadu, the entire GST becomes IGST at the full rate (18%), and it gets shared between the central and destination state governments through a backend formula.

For businesses, this split matters for ITC. CGST credit can only be used against CGST liability. SGST credit against SGST. IGST credit can be used against any of them. If you’re getting this wrong in your billing, your ITC reconciliation is going to be a mess every quarter — and the right GST billing software handles this split automatically, so you never have to think about it.

Items That Got Cheaper After GST 2.0, and Things That Got Costlier

The changes made in September of 2025, will benefit most consumers and many businesses. The following are the details of the changes made. 

More Cheaper: Washing machines, refrigerators, air conditioning units, and televisions all dropped from 28% to 18%. Personal hygiene products (e.g., toothpaste, chimney eyes, toilet rolls, etc.), kitchen utensils (e.g., pressure cookers, umbrellas, sewing machines, bikes, etc.), and small washing machines were formerly in the 28% tax class for several years; but have now been significantly reduced by changing to the new lower tax class. 

More expensive: Goods and services that are considered to be luxury in nature (e.g., watches) have an effective tax rate of 40% under the new law (as the previous percentage rated the product at 28% plus cess, the actual tax rate on these items would exceed 40%).

Broadly unchanged: Restaurant services at 5% (without ITC). Hotel rooms under ₹7,500 at 5%. Most professional and financial services are at 18%.

The Registration Question: When Do You Actually Need to Register for GST?

This comes up constantly, especially for smaller businesses and freelancers.

The threshold is ₹20 lakh annual turnover for most states. If you cross that, GST registration is mandatory. For special category states (the northeastern states, Uttarakhand, Himachal Pradesh, and a few others), the threshold is ₹10 lakh.

Service providers need to pay attention here. If you’re a freelancer, consultant, or small agency billing clients, the ₹20 lakh limit applies to you too. Once you cross it, you need to register, start charging GST, and file regular returns.

Sellers who sell through an E-commerce platform are held to different guidelines; for example, if you’re an E-commerce seller on Amazon or Flipkart (or any other E-commerce marketplace) you are required to have a GST registration regardless of how much money you generate in gross sales. All E-commerce marketplaces that sell through them and have GST registration must collect TCS. Sellers are required to have an active GSTIN to be compliant with the new GST law. 

HSN Codes 

Every product in India’s GST system has an HSN code, Harmonised System of Nomenclature. It’s a classification number that determines which GST slab the product falls into. And it’s on every invoice you raise.

Get the HSN code wrong, and you’ve essentially gotten the rate wrong, even if you applied a rate that looked correct. A wrong HSN code is a compliance failure, whether or not the rate itself matches.

Small businesses with fewer than ₹5 crore in turnover can use 4-digit HSN codes. Above that, 6-digit codes are required. For some categories, 8-digit codes apply.

Manual HSN lookups are how errors happen. GST billing software like MargBooks maintains an updated HSN master and auto-suggests codes when you type a product name — so even if you don’t know the code off the top of your head, the software points you to the right one. One fewer thing to get wrong.

Conclusion 

The GST percent in India isn’t a single number. Never was. The main difference between the old system and the new system is that the new GST system has made the tax rates more understandable than previously. In addition, the new GST system simplifies the tax structure of all businesses in India, making it easier for them to conduct business than before.

The basics of the tax structure under the new GST law include four different tax rates based upon product classification: 0% GST for basic necessities, 5% GST for basic goods and services, 18% GST for most commercial services/businesses, and 40% GST for sinful/luxury types of goods and services. 

When trying to figure out what tax rate applies to your products, you need to do three key things. First, make sure you know your products’ classification (in terms of HSN/HS Code). Second, understand how to calculate the appropriate combination of the CGST/SGST/IGST (based on where the products are going, either within India or from India to another country) and lastly, keep track of any changes made by the GST Council when they meet (to retain correct rates). MargBooks software can help you with better classification in terms of HSN/HS code. 

By keeping track of all of these issues, you should be able to manage them without spending all your free time on them.