On 22 September 2025, India simplified GST. Most goods and services now fall into two main rates instead of four, making prices easier to understand and many everyday items cheaper.
The new rate structure
| Rate | What it covers |
|---|---|
| 0% (exempt) | Many essentials, such as fresh food items, and individual life and health insurance premiums |
| 5% (merit rate) | Everyday goods and many services — most items earlier taxed at 12% moved here |
| 18% (standard rate) | Most goods and services — most items earlier taxed at 28% moved here |
| 40% (special rate) | Luxury and “sin” goods such as tobacco products and certain high-end vehicles |
A few special rates continue for specific goods, for example 3% on gold and 0.25% on rough diamonds. Rates for individual products depend on their HSN code, so always check the official notified rate for your item or service.
How to calculate GST
- Adding GST: GST = price × rate ÷ 100. A ₹1,000 item at 18% costs ₹1,180.
- Removing GST from an inclusive price: base price = total × 100 ÷ (100 + rate). For ₹1,180 at 18%, the base price is ₹1,000 and GST is ₹180.
- Same state: GST is split equally into CGST and SGST (9% + 9% for 18%).
- Different states: the full amount is charged as IGST.
What it means for small businesses
- Update item rates in your billing software and price lists.
- Invoices for supplies on or after 22 September 2025 must use the new rates.
- Make sure your invoices show HSN/SAC codes and the correct tax split.
Use the GST calculator for quick sums, and the GST invoice generator to create a compliant tax invoice.