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 system—0% (exempt), 5%, 12%, 18%, and 28%—with compensation cess on specified luxury/demerit goods. Your exact rate depends on correct HSN/SAC classification and the latest CBIC notifications. Always verify using official sources before invoicing.
Table of contents
Why GST rates matter
The rate you charge affects your pricing, margins, competitiveness, cash flows (via input tax credit), and audit risk. Misclassifying a product or service can lead to:
- Differential tax liability (shortfall) plus interest
- Penalties for incorrect classification
- Blocked or reversed input tax credit (ITC) for you and your buyers
Treat GST classification like a product spec: document it, verify it, and keep it updated with notifications.
GST slabs at a glance
| Slab | Rate | Typical items/services | Notes |
|---|
| Exempt (Nil) | 0% | Fresh fruits/vegetables, unbranded food grains, milk, eggs, salt, printed books; primary healthcare; core education | No GST is charged or collected |
| Essential | 5% | Packaged paneer/frozen veggies, tea/coffee, spices, life‑saving drugs; economy air travel; goods transport by rail | Concessional rate for essentials |
| Standard – Lower | 12% | Mobile phones and parts, specified processed foods (e.g., fruit juices), butter/cheese; some construction services | Verify exact HSN/SAC conditions |
| Standard – Higher | 18% | Soaps, toothpaste, hair oil, most industrial goods, IT/telecom/financial services | Default for many unlisted supplies |
| Luxury/Demerit | 28% | Cars, motorcycles, ACs, premium durables, aerated drinks, specified tobacco/pan masala products | Often plus compensation cess |
| Special | 3% / 0.25% | Precious metals (gold/silver/platinum) at 3%; rough precious/semi‑precious stones at 0.25% |
Note: The above is indicative. Exact rates depend on precise HSN/SAC classification, product description, packaging/branding, end‑use, and the latest CBIC notifications.
The slabs explained with examples
0% (Exempt)
- Goods: Fresh fruits and vegetables, unbranded/unpackaged cereals and pulses, milk, eggs, salt, bread, printed books
- Services: Primary healthcare, core educational services, agricultural labour/services
- Why it matters: Keeps essentials affordable. No GST is collected and usually no ITC on inputs linked exclusively to exempt supplies.
5% (Essential items)
- Goods: Packaged paneer and frozen vegetables, tea/coffee, spices, life‑saving medicines
- Services: Economy‑class air travel, goods transport by rail, select restaurant categories (often without ITC)
- Caution: Some goods at 5% lose ITC eligibility under special notifications. Always confirm.
12% (Standard – Lower)
- Goods: Mobile phones and parts, specified processed foods (e.g., fruit juices), butter, cheese
- Services: Certain construction/residential complex services (as notified)
- Tip: Mobile phones and parts have seen notification‑driven clarifications—verify the exact tariff headings.
18% (Standard – Higher)
- Goods: Hair oil, toothpaste, soaps, industrial intermediates, capital goods, computer monitors, printers
- Services: IT services, telecom, banking/financial services, outdoor catering
- Rule of thumb: If not specifically listed elsewhere, many goods and services fall under 18%.
28% (Luxury and demerit)
- Goods: Automobiles and motorcycles, aerated drinks, certain tobacco and pan masala products, high‑end durables including air conditioners
- Services: Specified luxury entertainment, casinos, betting/gaming as notified
- Often attracts compensation cess on top of 28% for select items—see the next section.
Special rates
- 3%: Gold, silver, platinum, and some precious metals and jewellery categories
- 0.25%: Rough precious and semi‑precious stones
- Note: These special rates are tightly defined by tariff headings. Small description changes can shift rates.
How to find your exact rate (HSN/SAC method)
Never guess your GST rate. Use this 5‑step method:
- Precisely identify your supply
- Describe the product/service in technical terms. Include features, composition, use, and whether it’s branded/packaged.
- Find the correct code
- Verify official notifications
- Check exceptions and conditions
- Packaging/branding (e.g., unbranded cereals may be exempt; branded/packaged versions may be taxed)
- End‑use or composition (e.g., medical grade vs general grade)
- Time‑bound notifications (rates can change from a specific date/time)
- Cess applicability on top of GST for demerit goods
- Document your rationale
- Record HSN/SAC chosen, exact description, notification/circular numbers, and date accessed
- Keep screenshots/PDFs of the CBIC table in your tax file for audit defense
Pro tip: Validate your invoices using a calculator before issuing them.
Zero rated vs exempt vs nil rated: know the difference
- Zero‑rated supplies: Exports and supplies to SEZ (as notified) are zero‑rated. Output tax is 0%, but ITC is generally available (subject to conditions). Different from exempt.
- Exempt (0%): No GST is charged and ITC on inputs/services used exclusively for exempt supplies is usually not available.
- Nil rated: Another way to indicate 0% on specified goods/services per notification.
Why it matters: Zero‑rating preserves ITC; exemption usually blocks it. This impacts your pricing and working capital.
Compensation cess: when the 28% slab is not the end
Compensation cess is an additional levy over GST for specific luxury/demerit goods (e.g., certain automobiles, aerated waters, tobacco/pan masala categories). Rates and valuation methods can vary by item and have evolved over time.
- Examples (indicative only):
- Certain motor vehicles: cess rates vary by type/engine capacity/length
- Aerated waters and certain energy drinks: ad valorem cess
- Tobacco and pan masala: special valuation/cess regimes as notified
Action: Always check the latest Compensation Cess notifications/schedules on CBIC before pricing demerit goods.
Industry snapshots (practical mini-lists)
These are not exhaustive—use them as starting points and confirm your HSN/SAC.
Reverse charge, composition, and ITC nuances
-
Reverse Charge Mechanism (RCM)
- Under RCM, the recipient pays GST instead of the supplier for specific categories (e.g., legal services from advocates, certain goods transport services, import of services, supplies from unregistered persons in specified cases).
- The applicable rate remains the rate for the underlying supply; payment/credit flow changes.
- Maintain separate tracking for RCM liabilities and corresponding ITC claims.
-
Composition scheme (small taxpayers)
- Provides a lower, flat rate on turnover for eligible small businesses in lieu of regular GST.
- Typical categories (subject to turnover limits/conditions and notifications):
- Manufacturers/traders: concessional rate on turnover
- Restaurants (not serving alcohol): concessional rate option historically existed
- Service providers: a special composition‑like scheme at a notified rate (e.g., 6%) up to a turnover threshold
- Caveats: No collection of tax from customers on invoices (you pay out of turnover), limited ITC eligibility, and specific compliance formats. Always confirm current thresholds and rates on CBIC/GST Portal.
-
ITC restrictions that affect effective rate
- Restaurant services at concessional rates often come without ITC
- Blocked credits under Section 17(5) (e.g., motor vehicles for personal use, certain works contracts) affect pricing
- Apportionment and reversal rules apply if you supply both taxable and exempt goods/services
IGST vs CGST+SGST: split and examples
GST is destination‑based. The tax split depends on place of supply and whether the supply is intra‑state or inter‑state.
- Intra‑state supplies: CGST + SGST in equal proportions (e.g., 18% becomes 9% + 9%)
- Inter‑state supplies and imports: IGST (e.g., 18% as IGST)
Example: You invoice ₹100,000 for IT services at 18%.
- Client in the same state: CGST ₹9,000 + SGST ₹9,000
- Client in another state: IGST ₹18,000
Correct place‑of‑supply rules are critical—especially for services (billing location can differ from place of supply).
Example (exclusive): Goods worth ₹50,000 at 18% → GST ₹9,000; total ₹59,000.
Example (inclusive): Price tag ₹59,000 at 18% → Base = 59,000 ÷ 1.18 ≈ ₹50,000; GST ≈ ₹9,000.
Tool for error‑free math: GST Calculator (https://www.zenixtools.com/tools/gst-calculator)
Classification traps to avoid
- Assuming similar items share the same rate: Small differences in material, packaging, or functionality can change HSN.
- Ignoring branding/packaging: Unbranded/unpackaged cereals can be exempt; branded/packaged may attract 5% or more.
- Overlooking cess: 28% slab items may also need compensation cess.
- Treating composite/mixed supplies incorrectly: Bundles can change the effective rate based on the principal supply.
- Service nuances: Restaurant concessions often block ITC; outdoor catering vs restaurant service can differ.
- Not tracking notification timelines: Rates change via dated notifications—apply the rate valid on the supply date.
Mitigation: Map each SKU/service to an HSN/SAC, save notification references, and review after each GST Council meeting.
Compliance, penalties, and documentation
Helpful resources from Zenix Tools:
Staying current: council meetings and notifications
GST rates are dynamic. Changes become effective only through CBIC notifications, often following GST Council recommendations.
- Monitor: https://cbic-gst.gov.in and https://gstcouncil.gov.in
- Subscribe to circulars/press releases
- Update ERP/price lists promptly; send customer advisories for mid‑cycle changes
- For long‑term contracts, include a tax‑change clause to adjust prices if rates/cess change
Pro workflow for teams:
- Map every SKU/service to HSN/SAC in your master data.
- Link each code to a notification reference and effective date.
- Configure ERP tax rules and run test invoices.
- Train billing and sales teams on common edge cases.
- Review classifications quarterly and after each Council meeting.
FAQs
What are the current GST slabs in India?
India uses 0% (exempt), 5%, 12%, 18%, and 28% slabs. Precious metals often have special rates (e.g., 3%), and certain goods attract compensation cess in addition to the GST rate. Always verify via CBIC notifications.
How do I find the correct GST rate for my product or service?
Identify the correct HSN (goods) or SAC (services) and confirm the rate using CBIC’s official rate schedules and the latest notifications. Use tools like Zenix Tools’ HSN Lookup (https://www.zenixtools.com/tools/hsn-lookup) and GST Calculator (https://www.zenixtools.com/tools/gst-calculator) to validate before invoicing.
Are GST rates uniform across states?
Yes, rates are nationally notified. The tax split differs by transaction type: intra‑state supplies use CGST+SGST; inter‑state and imports use IGST.
Do exports attract GST?
Exports are typically zero‑rated. You can export under bond/LUT without payment of IGST or pay IGST and claim a refund, subject to conditions and documentation.
What is compensation cess and when does it apply?
It’s an additional levy on specified luxury/demerit goods (e.g., certain motor vehicles, aerated waters, tobacco/pan masala categories). Rates and valuation rules are item‑specific and notification‑driven. Check CBIC schedules before pricing.
What happens if I apply the wrong GST rate?
You’ll owe the differential tax plus interest and may face penalties. Your buyers’ ITC could be impacted, leading to disputes and credit notes.
Do small businesses need to register for GST?
Registration depends on aggregate turnover thresholds, nature of supplies (e.g., inter‑state), and special categories. Thresholds and exemptions can change—check the latest on the GST Portal (https://www.gst.gov.in) or CBIC.
How often do GST rates change?
Rates can change following GST Council meetings and become effective via CBIC notifications. Always apply the rate valid on the supply/invoice date.
Is restaurant food taxed at 5% or 18%?
Many restaurant services are taxed at 5% without ITC. However, categories like outdoor catering, event catering, or specified venues can attract 18% with different ITC rules. Verify the applicable category and conditions.
What’s the default GST rate if an item isn’t clearly listed?
18% is commonly the default for many goods and services not specifically listed elsewhere. Still, classify your supply via HSN/SAC and confirm with notifications.
Can I claim ITC on capital goods and services?
Generally yes, if used for making taxable supplies and not blocked by Section 17(5). Keep documentation and ensure vendor compliance (GSTR‑1/2B matching) to avoid ITC disputes.
How do I handle mixed and composite supplies?
- Composite supply: Tax rate of principal supply applies.
- Mixed supply: Highest rate among the bundled items applies.
Careful drafting of bundles and invoices can avoid unintended higher taxation.
Do I need to show HSN/SAC on invoices?
HSN/SAC disclosure depends on turnover slabs and notifications. Many businesses above prescribed thresholds must show HSN/SAC at specified digit levels. Check current rules on CBIC/GST Portal.
Glossary
- HSN: Harmonized System of Nomenclature for goods classification
- SAC: Services Accounting Code for services classification
- ITC: Input Tax Credit—credit of GST paid on inputs, input services, and capital goods
- RCM: Reverse Charge Mechanism—recipient pays the tax
- IGST/CGST/SGST: Inter‑State, Central, and State GST components
- Zero‑rated: Supplies (like exports) with 0% output tax but ITC typically available
- Exempt: 0% output tax and ITC usually not available for inputs used exclusively for exempt supplies
- Compensation Cess: Additional levy on specified luxury/demerit goods
Sources and official references
For quick calculations and lookups:
Disclaimer
This guide is for general information and planning. GST is notification‑driven and subject to change. Always verify your HSN/SAC classification and applicable rate/cess with official CBIC notifications and consult a qualified tax professional for your specific facts.