GST 2.0: The 12% and 28% Slabs Are Gone — What Changed

If your invoicing still offers 12% and 28% as options, it's out of date.

At its 56th meeting on 3 September 2025, the GST Council approved what's been called GST 2.0: a restructuring that collapsed the four-slab system into a much simpler one. The revised rates took effect on 22 September 2025.

What the slabs look like now

Slab	What sits there
0% (nil)	Essentials — most dairy, a list of lifesaving drugs, educational materials; individual life and health insurance became exempt
5%	The bulk of everyday goods and services, including most of what used to be at 12%
18%	The standard rate — most of what used to be at 28% landed here
40%	New. Demerit and luxury goods only

The old 12% and 28% slabs were removed for most goods and services.

Two special rates continue to exist outside this structure: 0.25% (rough diamonds and similar) and 3% (gold, silver and jewellery). If you don't deal in gems or precious metals, you'll never touch them.

The new 40% slab

This is the genuinely new addition, and it's narrow by design — demerit and luxury items:

• Tobacco and tobacco products, pan masala
• Aerated and caffeinated beverages
• Large passenger vehicles, and motorcycles above 350cc
• Yachts and personal aircraft
• Casinos, betting, lotteries and online money gaming

For the overwhelming majority of small businesses, 40% is irrelevant. It exists so that removing the 28% slab didn't hand a tax cut to sin goods.

Which direction did things move?

Broadly:

• 12% → 5% for most goods and services that were in the 12% bracket
• 28% → 18% for most of the 28% bracket
• 28% → 40% for the demerit and luxury list above
• Some items moved into 0%, notably individual health and life insurance

The net effect for a typical small business is that a number of things got cheaper, and the number of rate decisions you have to make dropped considerably.

What you actually need to do

1. Audit the rates on your own products

This is the one that matters. Any product you set up before September 2025 at 12% or 28% is now carrying a rate that no longer exists. Nothing in your software will necessarily complain — it will just keep producing invoices with a stale number on them.

Go through your catalogue and check every item against its current rate.

2. Store the rate with the item, not in your head

The most common failure mode isn't ignorance of the rules — it's a default. If new line items default to 18% and someone doesn't change it, you get a plausible-looking wrong invoice, which is the worst kind: nothing looks broken.

Keeping the HSN code and the GST rate against each product in an item master means the correct rate is applied because it was decided once, carefully, rather than remembered under time pressure.

3. Re-check open quotations

A quotation issued before 22 September 2025 with a 12% or 28% line is quoting a rate that no longer applies. The rate that governs is the one in force at the time of supply, not the time of quoting — so a long-validity quote may need reissuing. More on how quotations, proformas and tax invoices differ.

4. Check your invoice template

If your invoice format has hardcoded tax columns or a fixed rate dropdown, update it. And while you're there, confirm the rest of the format still satisfies Rule 46 — the 16 mandatory fields are here.

Why "just look up the rate" isn't as easy as it sounds

There's no clean, free, authoritative API that maps an HSN code to a current GST rate. Rates change by Council decision, notifications carry exceptions and conditions, and the same HSN can attract different rates depending on specifics such as packaging or sale price.

Which is why the practical answer isn't automated lookup — it's deciding the rate once per product, with your CA if there's any doubt, and then storing it so it's applied consistently. Any tool promising to infer your rate from a code alone is guessing on your behalf about something you're liable for.

The short version

Four slabs became three plus nil. 12% and 28% are gone for most goods and services; 5% and 18% now carry the bulk of the economy, and a narrow 40% slab covers luxury and demerit items. Effective 22 September 2025.

The action item is small but real: audit your product rates, and store them per item so the right one is applied every time.

Not tax advice. Rate classification is item-specific and changes by notification. Verify your particular products against current notifications or with a chartered accountant — especially anything near a slab boundary.