In September 2025, the GST Council approved the most significant restructuring of GST since it was introduced in 2017. If you're still pricing goods or raising invoices using the old 12%/28% mental map, here's what's changed and why it matters.
The old structure vs the new one
GST earlier ran on five rates — 0%, 5%, 12%, 18% and 28% — plus a compensation cess on top of several items. That's now been collapsed into a simpler structure:
| Slab | Applies to |
|---|---|
| 0% (Nil) | Essentials — many food items, life-saving drugs, educational materials, individual health/life insurance |
| 5% | Everyday goods and priority items (mostly the old 5% and 12% items combined) |
| 18% | The default rate for most goods and services, including most professional and technical services |
| 40% | Luxury and "sin" goods — tobacco, pan masala, select luxury vehicles, aerated drinks |
In short: the 12% and 28% slabs are gone. Most items that were at 12% moved down to 5%; most items that were at 28% moved down to 18%, except a narrow list of luxury and demerit goods that now sit at the new 40% rate.
What this means if you run a business
- Re-check your item-wise GST rates. If your billing software still has old rates mapped against your SKUs or services, invoices could be wrong from the date of change.
- Update price lists and quotations. Where GST was quoted at 12% or 28%, that's very likely no longer correct.
- Input tax credit reconciliation needs a closer look for the transition period, since rates changed mid-year for many suppliers.
- Composition scheme rates remain separate — typically 1%, 5% or 6% of turnover depending on the category — and are unaffected by this restructuring.
Where professional services stand
Professional and consulting services — including accounting, legal and most B2B service categories — continue to sit at 18%, which was already the standard rate before the reform and remains so now.
A word of caution
Rate classification disputes are common precisely at points like this, when items shift slabs and descriptions get reinterpreted. If you sell a product or service where the classification isn't obvious, it's worth getting it confirmed rather than assuming — a wrong rate on an invoice is a compliance problem that compounds every month it continues.
Not sure which slab applies to what you sell?
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