GST Rates in India: Complete 2026 Guide for Businesses
Last updated: 21 June 2026
Category: Finance
Quick answer (for busy readers): India follows a multi‑slab GST regime — 0% (exempt), 5%, 12%, 18%, and 28% — with Compensation Cess on specified luxury/demerit goods (e.g., certain automobiles, aerated waters, tobacco/pan masala categories). Your exact rate depends on precise HSN/SAC classification, product/service description, packaging/branding, end‑use conditions, and the latest CBIC notifications. Always verify on official sites before invoicing.
What’s new to watch in 2025–2026 (stay alert):
- Online gaming/casinos/betting valuation and place‑of‑supply clarifications continue to evolve through notifications/circulars. Verify the latest.
- E‑invoicing thresholds, e‑way bill rules, and input tax credit (ITC) documentation checks remain active compliance hotspots — confirm current thresholds on the GST Portal (https://www.gst.gov.in).
- Rate fitment changes can occur post GST Council meetings. Monitor CBIC for effective dates and transitional provisions.
Table of contents
Why GST rates matter
The GST rate you charge directly impacts pricing, margins, cash flows (via ITC), competitiveness, and audit risk. Misclassification can cause:
- Short payment of tax with interest from the date due
- Penalties for incorrect classification and erroneous returns
- ITC reversals for you and your customers, disrupting working capital
Treat classification like a core product attribute:
- Maintain a classification sheet per SKU/SAC
- Capture HSN/SAC, detailed description, and relevant notification references
- Review quarterly for updates and after each major GST Council meeting
GST slabs at a glance
| Slab | Rate | Typical items/services | Notes |
|---|
| Exempt (Nil) | 0% | Fresh fruits/vegetables, unbranded cereals/pulses, milk, eggs, salt, printed books; core healthcare; core education | No GST charged; ITC on inputs used exclusively for exempt supplies generally not allowed |
| Essential | 5% | Specified packaged foods (e.g., paneer/frozen vegetables), tea/coffee, spices, some life‑saving drugs; economy air travel; goods transport by rail | Concessional rate; verify item‑wise conditions |
| Standard – Lower | 12% | Certain processed foods, dairy products (e.g., butter/cheese), specified appliances/parts; some construction categories | Conditions and exact HSN matter |
| Standard – Higher | 18% | Soaps, toothpaste, hair oil, most industrial/intermediate goods, capital goods; IT/telecom/financial services | Default slab for many items not otherwise specified |
| Luxury/Demerit | 28% | Cars, motorbikes, air conditioners, premium durables, aerated waters, specified tobacco/pan masala products; certain gaming/entertainment services | May attract Compensation Cess over and above GST |
| Special |
Note: These are indicative buckets. Exact rates depend on the HSN/SAC, product/service description, packaging/branding, end‑use, and the latest CBIC notifications/circulars.
The slabs explained with examples
0% (Exempt)
- Goods: Fresh fruits/vegetables; unbranded and unlabelled cereals/pulses; milk; eggs; salt; bread; printed books.
- Services: Primary healthcare (e.g., services by clinical establishments/doctors as notified), core educational services (pre‑school to higher education) and services relating to agriculture.
- Business impact: No GST is collected; ITC on inputs used exclusively for exempt supplies is typically blocked. Mixed‑use inputs may require proportionate ITC reversal.
5% (Essential items)
- Goods: Packaged paneer and frozen vegetables; tea/coffee; spices; select life‑saving medicines and vaccines (as notified).
- Services: Economy‑class air travel; goods transport by rail; certain restaurant/eating services (conditions apply and may restrict ITC).
- Watchouts: Some concessional goods/services have specific branding/packaging or composition conditions. Violating conditions can push the rate higher and trigger demand.
12% (Standard – Lower)
- Goods: Specified processed foods (such as fruit juices), dairy items like butter and cheese, some appliances/parts and materials.
- Services: Certain construction/residential complex and works contracts categories under prescribed conditions.
- Tip: Items like mobile phones/parts and consumer electronics have seen multiple clarifications historically. Always validate current tariff headings and notifications.
18% (Standard – Higher)
- Goods: Hair oil, toothpaste, soaps; most industrial inputs/intermediates; capital goods; many electronics like monitors/printers.
- Services: IT/ITES, telecom, banking/financial services, outdoor catering and professional/management services.
- Rule of thumb: If not specifically listed in a lower or higher slab, many goods/services default to 18%.
28% (Luxury and demerit)
- Goods: Automobiles/motorcycles; air conditioners and select high‑end durables; aerated waters; specified tobacco/pan masala products.
- Services: Certain entertainment, betting/casinos, and online gaming categories (as notified) may fall under 28%.
- Cess alert: Many of these items additionally attract Compensation Cess. Confirm both GST rate and cess rate.
Special rates
- 3%: Gold, silver, platinum, and certain specified precious metal supplies.
- 0.25%: Rough precious and semi‑precious stones.
- Precision required: These depend on exact tariff descriptions and notes. Small wording changes (e.g., studded vs plain, semi‑processed vs finished) can change the rate.
How to find your exact rate (HSN/SAC method)
Never guess your GST rate. Use this 5‑step workflow and document your reasoning.
- Define your supply precisely
- Goods: composition/materials, dimensions/specs, function/end‑use, packaging/branding, variant codes.
- Services: scope of work, deliverables, duration/frequency, whether bundled/composite/mixed, and exclusions.
- Determine the correct code
- Verify with official sources
- Check exceptions/conditions
- Packaging and branding (e.g., unbranded cereals may be exempt; branded/packaged may be taxed)
- End‑use (e.g., medical‑grade vs industrial; educational vs commercial)
- Time‑bound rate changes and effective dates
- Compensation Cess applicability and valuation (ad valorem/specific)
- Document your rationale
- Record HSN/SAC, exact description, relevant notifications/circulars with dates
- Keep screenshots/PDFs of the CBIC rate table and save links
- Align your ERP/PoS master data; add internal reviewer sign‑off
Pro tip: Validate invoice math before issuing.
Zero rated vs exempt vs nil rated: know the difference
- Zero‑rated supplies: Typically exports and supplies to SEZs (as notified). Output GST is 0%, but ITC is generally available (subject to conditions). Refunds may be available via LUT/bond or on accumulated ITC.
- Exempt supplies (0%): No GST charged; ITC on inputs/services used exclusively for exempt supplies is usually blocked. Mixed credits may need proportionate reversal.
- Nil‑rated: Another term indicating a 0% rate under a specific notification for particular goods/services.
Why it matters: Zero‑rating generally preserves ITC, while exemption often blocks ITC — crucial for pricing and cash‑flow planning.
Compensation cess: when the 28% slab is not the end
Compensation Cess is an additional levy over GST on specified luxury/demerit goods to compensate states for revenue loss during GST transition. It applies to limited categories (e.g., certain motor vehicles, aerated waters, tobacco/pan masala categories) and follows rates/valuation specified in the Compensation Cess schedules and amendments.
Key points:
- Cess is levied in addition to the applicable GST rate (often 28%) on the same taxable value unless a specific valuation rule applies.
- For some products, cess may be ad valorem (a percentage of value). For others, it may be specific (a fixed amount per quantity like per unit/weight), or a combination.
- Cess applicability, rates, and valuation methods are item‑specific. Always refer to the latest cess schedule on the CBIC site.
Illustrative example (ad valorem):
- Taxable value of goods = ₹100,000
- GST rate = 28% → GST = ₹28,000
- Compensation Cess (say, 12% ad valorem for the item) → Cess = ₹12,000
- Total tax = ₹40,000; invoice value = ₹140,000
Illustrative example (specific):
- Quantity = 1,000 units; Cess = ₹X per unit → Total Cess = 1,000 × ₹X
- Add applicable GST separately as per the rate schedule
Always confirm: https://cbic-gst.gov.in/gst-goods-services-rates.html
Industry snapshots (practical mini-lists)
These lists are directional. Verify HSN/SAC and the latest notifications before invoicing.
-
Food & FMCG
- Exempt: Unbranded/unlabelled cereals/pulses; fresh fruits/vegetables; bread; salt.
- 5%: Packaged paneer; frozen vegetables; tea/coffee; spices; select life‑saving drugs.
- 12%: Fruit juices and specified processed foods; butter/cheese based on classification.
- 18%: Personal care staples (soaps, toothpaste, hair oil) and many packaged foods not covered under lower slabs.
-
Pharma & Healthcare
- Exempt: Core healthcare services by clinical establishments; diagnostic services (as notified); specified drugs provided through government schemes.
- 5%/12%/18%: Medicines and medical devices vary by HSN; critical/life‑saving drugs often at concessional rates; devices/consumables commonly at 12% or 18%.
-
Electronics & Appliances
- 12%/18%: Consumer electronics, monitors, printers, select parts. Classification differences between parts vs finished goods can change rates.
- 28%: Certain premium durables like air conditioners; verify cess applicability where relevant.
-
Automobiles & Auto Components
- 28% plus Compensation Cess: Many passenger vehicles; cess varies by type/specs per schedule.
- 18%: Most auto components/parts; lubricants and consumables typically at 18% unless specifically notified.
-
Real Estate & Construction
- Mixed: Works contracts and residential construction can fall in different slabs based on project type/affordable housing parameters and notification‑linked conditions (including ITC restrictions in certain schemes). Always examine the applicable scheme/notification.
-
IT/ITES & Professional Services
Reverse charge, composition, and ITC nuances
Reverse Charge Mechanism (RCM)
- Under RCM, the recipient pays GST instead of the supplier for specific notified supplies (e.g., certain goods transport agency services, legal services by advocates to business entities under specified conditions, import of services, and other notified categories).
- Action items: Identify RCM supplies in procurement; self‑invoice where required; discharge tax in cash; claim eligible ITC (subject to conditions) in subsequent returns.
Composition Scheme
- Available to eligible small taxpayers under turnover thresholds and conditions (rates and eligibility vary by business type and are notified by the government).
- Pros: Lower compliance burden and a fixed rate on turnover.
- Cons: No ITC on inward supplies and restrictions on inter‑state supplies/e‑commerce participation (check current rules for your entity type).
ITC (Input Tax Credit) essentials
- Eligibility: Possession of a valid tax invoice/debit note, receipt of goods/services, tax paid to the government by the supplier, and vendor’s return compliance (subject to matching/credit restrictions in force).
- Blocked credits: Motor vehicles for personal use, club memberships, personal consumption, works contract for immovable property, etc., unless conditions for business use are satisfied per the Act/Rules.
- Reversals: For exempt or non‑business use; for non‑payment to suppliers within the prescribed time; and on credit notes/price reductions.
- Documentation discipline: Reconcile vendor compliance, GSTR‑2B vs purchase register, and maintain PoS/e‑invoice references.
IGST vs CGST+SGST: split and examples
- Intra‑state supplies: Charge CGST + SGST (equal half‑splits of the GST rate). Example: 18% → 9% CGST + 9% SGST.
- Inter‑state or import supplies: Charge IGST at the full applicable rate. IGST generally allows cross‑utilization of credits more flexibly across states.
Examples
- Sale within Maharashtra at 18%: Tax = 9% CGST + 9% SGST.
- Sale from Maharashtra to Karnataka at 18%: Tax = 18% IGST.
- Import into India: IGST levied on assessable value + customs duties (as per Customs valuation), with eligibility to claim ITC of IGST paid (subject to conditions).
Pro tip: Determine place of supply (PoS) carefully for services (location of supplier vs recipient vs place of performance) — it governs whether IGST or CGST+SGST applies.
Exclusive method (add GST to base price)
- Given: Base price (B), GST rate (r%)
- GST amount = B × r/100
- Invoice value = B + GST
Inclusive method (back‑calculate GST from MRP/inclusive price)
- Given: MRP/inclusive price (M), GST rate (r%)
- GST amount = M × r / (100 + r)
- Base price (before GST) = M − GST amount
With Compensation Cess (if applicable)
- If ad valorem: Cess = Taxable value × cess rate
- If specific: Cess = Quantity × cess per unit
- Total Tax = GST + Cess; Invoice Value = Taxable value + Total Tax
Check with a calculator: https://www.zenixtools.com/tools/gst-calculator
Classification traps to avoid
- Picking a rate by similarity, not by HSN/SAC: Similar‑looking items can reside in different chapters/notes with different rates.
- Ignoring explanatory notes: Chapter/section notes often decide between “parts of” vs “accessories” or “prepared foods” vs “raw.”
- Overlooking packaging/branding: Unbranded/unlabelled staples may be exempt; branding/packaging can trigger taxability.
- Missing end‑use qualifiers: Industrial vs medical grade, educational vs commercial services can flip the rate.
- Bundling errors: Mixed/composite supplies need correct principal supply identification; wrong treatment leads to wrong tax rate.
- Relying on outdated PDFs/screenshots: Always reconfirm with the current CBIC table and effective dates.
- Not documenting rationale: Without a paper trail, audit defense is painful even when classification is correct.
Compliance, penalties, and documentation
Core compliance calendar (indicative; verify current due dates on GST Portal)
- GSTR‑1: Outward supplies summary (monthly/quarterly as applicable)
- GSTR‑3B: Monthly summary return with tax payment
- E‑Invoice: Mandatory for specified turnover thresholds; generate IRN and QR as required
- E‑Way Bill: For movement of goods over thresholds/conditions
Consequences of rate misclassification
- Tax shortfall + interest from original due date
- Penalties for incorrect returns/misstatements
- ITC denial/reversal for you and your buyers, cascading into vendor disputes
Documentation stack for audit readiness
- Classification sheet: HSN/SAC, detailed descriptions, notifications/circulars, decision notes
- Copies/screenshots of CBIC rate tables (with URLs and date captured)
- Contracts/POs/SOWs indicating end‑use or service scope
- Product spec sheets, packaging/branding proofs, and BOMs for manufactured goods
- Tax working papers, reconciliations (GSTR‑1 vs 3B vs books; GSTR‑2B vs purchase register)
Staying current: council meetings and notifications
Practical upkeep routine (monthly/quarterly)
- Subscribe to CBIC and GST Council press releases
- Maintain a change log of rate/RCM/cess updates with effective dates
- Run a master data diff in your ERP to ensure HSN/SAC and rates match official tables
Free tools
Downloadable checklists (build your own from the points below)
FAQs
-
What are the current GST slabs in India?
India has 0% (exempt), 5%, 12%, 18%, and 28% slabs. Some goods/services have special rates, and specified items attract Compensation Cess over and above GST. Always verify the latest CBIC schedule.
-
How do I know the correct GST rate for my product/service?
Identify the correct HSN/SAC, read the relevant chapter/section notes, and cross‑check CBIC notifications. Capture your rationale and keep dated evidence.
-
What’s the difference between zero‑rated and exempt?
Zero‑rated (e.g., exports/SEZ supplies) carries 0% but generally allows ITC/refunds. Exempt supplies also carry 0% but usually block ITC on related inputs.
-
When does Compensation Cess apply?
Only to notified luxury/demerit goods (e.g., certain automobiles, aerated waters, tobacco/pan masala categories). Check the cess schedule for rates and valuation (ad valorem vs specific).
-
Are restaurant services taxed at 5% or 18%?
Depends on category and conditions (including ITC restrictions in certain schemes). Confirm the current notification applicable to your format.
-
Is ITC available on motor vehicles?
Generally blocked for personal conveyance; allowed when used for further supply of such vehicles or specified eligible business uses as per the Act/Rules. Review the conditions carefully.
-
What rate applies to software/SaaS?
Most IT/ITES and SaaS services are taxed at 18% under relevant SAC, unless specifically notified otherwise. Place‑of‑supply rules determine IGST vs CGST+SGST.
-
How does GST work for e‑commerce sellers?
Rates depend on the product/service HSN/SAC. TCS/TDS provisions and platform rules may apply. Verify your category’s rate, invoicing, and threshold compliance.
-
How do I compute GST from an inclusive price?
Use: GST = M × r/(100 + r), where M is the inclusive price and r is the GST rate. Base = M − GST.
-
What if my supplier charged the wrong rate?
Request a corrected invoice/credit note. If ITC was taken at a wrong rate, reverse/adjust and pay differential tax with interest as applicable.
Glossary
- HSN: Harmonized System of Nomenclature code for goods classification.
- SAC: Services Accounting Code for service classification.
- CBIC: Central Board of Indirect Taxes and Customs (publishes GST notifications/rates).
- GST Council: Federal body that recommends rates and policy changes.
- Exempt: Supplies taxed at 0% with no ITC on related inputs (generally).
- Zero‑rated: Supplies at 0% with ITC/refund eligibility (e.g., exports/SEZ) subject to conditions.
- Nil‑rated: Specific goods/services notified at 0%.
- ITC: Input Tax Credit — credit of GST paid on inputs/input services/capital goods used in business.
- RCM: Reverse Charge Mechanism — tax liability shifts to recipient for notified supplies.
- Composite supply: Two or more supplies naturally bundled; taxed at the rate of principal supply.
- Mixed supply: Two or more supplies bundled not naturally bundled; highest rate among them applies.
- Place of Supply (PoS): Determines whether a supply is inter‑state (IGST) or intra‑state (CGST+SGST).
- E‑invoice: Electronic invoicing with IRN/QR for specified taxpayers.
- E‑way bill: Electronic document for movement of goods above thresholds.
- Cess: Additional levy on specified luxury/demerit goods over and above GST.
- Ad valorem cess: Cess based on value (percentage).
- Specific cess: Cess based on quantity (per unit/weight/volume).
- LUT: Letter of Undertaking for exporting without payment of IGST.
- BRC/FIRC: Bank Realization Certificate/Foreign Inward Remittance Certificate — proof of export proceeds.
Sources and official references
When using third‑party tools, always reconcile outcomes with official CBIC tables and current notifications.
Disclaimer
This guide is for general information and educational purposes only and does not constitute legal, tax, or professional advice. GST rates, cess applicability, exemptions, thresholds, and compliance rules change through notifications/circulars and may vary by facts and conditions. Always verify details on official portals (CBIC, GST Council, GST Portal) and consult a qualified tax professional before acting.