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GST 2.0 Is Here — What Changed on September 22, 2025?

For most consumers, this means everyday essentials — hair oil, toothpaste, soap, butter, ghee, utensils, tractors — got significantly cheaper (dropped from 12–18% to 5%). Appliances and cars in the small/mid segment dropped from 28% to 18%. The flip side: aerated drinks, caffeinated beverages, luxury vehicles, yachts, and casino services jumped from 28% to 40%.

If you are a business owner, the change has direct implications for your purchase orders, invoices, and ITC claims. Any goods received before September 22 at the old rate will have ITC at the old rate, while goods received on or after September 22 attract the new rate. Transition stock provisions apply — check with your GST consultant if you are in a sector with rate cuts.

GST Rate Slabs in India — Updated for 2025–26

After the GST 2.0 reforms, the primary rate structure is now 0%, 5%, 18%, and 40%. The 12% and 28% slabs still exist for a small number of goods not yet migrated. A few niche rates (0.25%, 0.1%, 3%) continue for specific categories like rough diamonds and gold.

Key GST Rate Changes — Before and After September 22, 2025

Here is a quick-reference table of the most practically relevant changes for consumers and businesses. Items marked ↓ got cheaper; items marked ↑ got more expensive.

How to Calculate GST — Add GST and Remove GST Explained

GST calculations are simple once you know the direction you need to go. There are two scenarios every business and consumer encounters:

Adding GST to a base price (exclusive → inclusive)

You have the pre-GST price and need to find the final payable amount. This is what a manufacturer or wholesaler does when raising an invoice.

Removing GST from an inclusive price (reverse calculation)

You have the MRP (which includes GST) and need to find the base price and the GST component. This is what happens at a retail point of sale or when you see a price tag that includes GST.

CGST + SGST vs IGST — which applies?

Intra-state transaction (supplier and buyer in the same state): GST is split equally into CGST (Central GST) and SGST (State GST). At 18%, CGST = 9% and SGST = 9%. Both appear as separate line items on the invoice.

Inter-state transaction (supplier and buyer in different states, or import/export): Only IGST (Integrated GST) applies at the full rate. At 18%, IGST = 18%. The Central Government collects IGST and then splits it between itself and the destination state. This is why an inter-state invoice shows only IGST, not CGST+SGST.

GST for Businesses — 6 Things You Need to Know

Frequently Asked Questions — GST 2025

• What are the new GST rates effective from September 22, 2025? ▼
  The 56th GST Council introduced GST 2.0 effective September 22, 2025. Key changes:
  
  Rate cuts: Hair oil, shampoo, toothpaste, soap — 18% → 5%. Butter, ghee, dairy spreads — 12% → 5%. Individual health and life insurance — 18% → Nil. Exercise books, maps, pencils, crayons — 12% → Nil. Air conditioners, TVs >32", monitors — 28% → 18%. Small/mid cars (petrol ≤1200cc, diesel ≤1500cc), motorcycles ≤350cc, goods transport vehicles — 28% → 18%.
  
  Rate hikes: Aerated water, soft drinks, energy drinks — 28% → 40%. Large luxury cars, motorcycles >350cc — 28% → 40%. Yachts, personal aircraft — 28% → 40%. Casinos, race clubs, IPL admission — 28% → 40%. Apparel above ₹2,500 per piece — 12% → 18%.
  
  Tobacco and pan masala: effective at a later date to be notified separately.
• What is the difference between CGST, SGST, and IGST? ▼
  CGST (Central GST): Levied by the Central Government on intra-state supply of goods and services. Always equal to SGST — each is half the total GST rate. Deposited to the Central Government.
  
  SGST (State GST): Levied by the State Government on intra-state supply. Equal to CGST. Deposited to the state where the buyer is located. In Union Territories, this is called UTGST.
  
  IGST (Integrated GST): Levied by the Central Government on inter-state supply (across different states) and on imports. Equal to the full GST rate (CGST + SGST combined). The Central Government then distributes the IGST revenue between itself and the destination state.
  
  Practical rule: same state → CGST + SGST on invoice. Different states → IGST only on invoice.
• Is GST charged on health and life insurance premiums from September 2025? ▼
  No — from September 22, 2025, individual health insurance and life insurance premiums are Nil-rated (0% GST), down from 18%. This was one of the most impactful consumer-facing changes in the GST 2.0 reforms, directly reducing the cost of insurance for individuals.
  
  Note: This applies to individual policies. Group health insurance (corporate policies) may have different treatment — verify with your insurer. The GSTIN of the insurer will determine whether the exemption applies to your specific policy type. Existing policies renewed after September 22, 2025 should reflect the new 0% rate.
• Who needs to register for GST in India? ▼
  GST registration is mandatory if:
  
  • Your aggregate annual turnover exceeds ₹40 lakh (goods) or ₹20 lakh (services) in most states. For northeastern and special category states, the limits are ₹20L and ₹10L respectively.
  • You are an e-commerce seller — mandatory regardless of turnover.
  • You supply goods or services across state borders (inter-state supply).
  • You are liable to pay GST under reverse charge mechanism.
  • You are an input service distributor or non-resident taxable person.
  
  Voluntary registration is also possible if you are below the threshold — useful if most of your customers are GST-registered businesses and you want to pass on ITC.
• What is Input Tax Credit (ITC) and how does it work? ▼
  Input Tax Credit (ITC) allows a GST-registered business to deduct the GST it paid on purchases from the GST it collected on sales. Only the net amount is deposited to the government.
  
  Example: A laptop retailer buys laptops from a distributor, paying 18% GST (₹15,300 on a ₹85,000 purchase). The retailer sells the laptop for ₹95,000 + 18% GST (₹17,100). ITC = ₹15,300. Net GST payable = ₹17,100 − ₹15,300 = ₹1,800.
  
  ITC is not available for: personal use items, motor vehicles for personal use (subject to conditions), food and beverages, club memberships, and goods used in exempted supplies. With GST 2.0 rate changes, ITC balances from old rates need careful reconciliation during the transition period.
• How does the GST on car purchases change after September 2025? ▼
  GST on cars changed significantly on September 22, 2025:
  
  Small/mid-segment cars (rate cut from 28% to 18%): Petrol and petrol-hybrid cars with engine capacity ≤1200cc and length ≤4000mm. Diesel and diesel-hybrid cars with ≤1500cc and ≤4000mm. Three-wheelers, motorcycles ≤350cc, and goods transport vehicles.
  
  Luxury/large cars (rate hike from 28% to 40%): Cars exceeding the small-car thresholds, large hybrids, motorcycles above 350cc, and aircraft for personal use.
  
  Note: These rates apply to the GST component. The cess (compensation cess) continues to apply separately on vehicles and is in addition to the GST rate. The total GST + cess burden determines the final vehicle cost — consult the specific notification for cess rates, which are separate from the GST rate changes.
• What is reverse charge mechanism (RCM) under GST? ▼
  Under the Reverse Charge Mechanism (RCM), the recipient of goods or services is liable to pay GST instead of the supplier. This applies in specific notified cases:
  
  Common RCM cases: services by a GTA (Goods Transport Agency) to a registered business; legal services by an advocate to a business; services by a director to the company; import of services from outside India; purchase from unregistered suppliers in certain notified categories.
  
  When RCM applies, the recipient must self-invoice, deposit GST to the government, and then claim ITC on that payment (if eligible). RCM transactions must be reported in GSTR-3B separately. The GST 2.0 reforms do not materially change the list of RCM-applicable services.