GST 2.0 Explained: 12% and 28% Slabs Removed — New 5%, 18% and 40% Rates
From 22 September 2025 GST has two main slabs, 5% and 18%, plus 40% for luxury and sin goods. What moved where, what it means for your invoices, and the 1 February 2026 tobacco change.
In short: since 22 September 2025, GST uses two main slabs, 5% and 18%, plus a special 40% rate for luxury and sin goods. The old 12% and 28% slabs were removed. The change was approved at the 56th GST Council meeting on 3 September 2025.
What changed
| Before | After 22 Sep 2025 | Examples |
|---|---|---|
| 18% | 5% | Soap, shampoo, toothpaste and many daily-use items |
| 12% | 5% | Most items earlier at 12% |
| 28% | 18% | Small cars, air conditioners, TVs, cement |
| 18% | Exempt | Individual life and health insurance policies |
| 28% + cess | 40% | Luxury and sin goods (tobacco moved from 1 Feb 2026) |
Special rates continue for some goods — for example 3% on gold and jewellery, 0.25% on rough diamonds and 1.5% on cut and polished diamonds. Always confirm the rate for your exact HSN/SAC code with the HSN/SAC finder.
Tobacco, pan masala and the end of compensation cess
Tobacco products and pan masala stayed on the old system until 1 February 2026. From that date the GST compensation cess ended on all goods, these products moved to the 40% GST rate, and the Centre added a separate excise duty on tobacco and a health cess on pan masala.
What you should do
- Update your billing software and invoice templates — remove 12% and 28% from rate lists. Our GST invoice generator and quotation maker already show only the current rates.
- Remove the cess column from invoices for ordinary goods.
- Check old price lists and quotations — prices quoted “inclusive of GST” at the old rate should be recalculated. Use the GST calculator to add or remove GST.
- Older invoices issued before 22 September 2025 at 12% or 28% remain valid — do not revise them.
Sources
- PIB — 56th GST Council recommendations (September 2025)
- ClearTax — GST reforms: new rates and slabs
- AIR News — 1 February 2026 notified for tobacco excise
Updated 2 October 2026. This is a general explainer, not tax advice — check notifications for your specific goods or services.
Frequently asked questions
Is there still a 12% GST rate?
No. From 22 September 2025 most items earlier at 12% moved to 5%. The 12% slab no longer exists as a standard rate.
Is 28% GST removed?
Yes. Most 28% items moved to 18%, and luxury and sin goods moved to the 40% rate.
Do I need to change invoices issued before 22 September 2025?
No. Invoices issued under the old rates stay valid. Use the new rates for supplies made on or after 22 September 2025.
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