GST News · Updated 18 September 2026

New GST Rate Slabs in 2026

What the 0%, 5%, 18% and 40% structure means for your invoices

The 56th GST Council meeting on 3 September 2025 approved the biggest rewrite of GST rates since the tax was introduced in 2017. The new structure took effect on 22 September 2025 and is often called GST 2.0.

The old five-rate system of 0%, 5%, 12%, 18% and 28% became a four-rate system: 0%, 5%, 18% and a 40% demerit rate. A year on, these are the rates every small business is billing under, and they are still the most common source of wrong invoices.

What Changed

Old Slab	Where Those Items Went
0% (Nil)	Stays nil, and more items were added to it
5%	Stays at 5%
12%	Slab abolished. Around 99% of these items moved down to 5%
18%	Stays at 18%
28%	Slab abolished. About 90% moved down to 18%, the rest to 40%

The compensation cess was also scrapped from 22 September 2025 on everything except specified tobacco products such as pan masala, gutkha, cigarettes, chewing tobacco and bidi.

Which Goods Got Cheaper

Nil rate: many dairy products, 33 lifesaving drugs and a range of educational materials
Exempt: individual health and life insurance policies
5%: daily essentials, agricultural goods and a large list of healthcare equipment
18%: small cars, motorcycles and most household appliances that were previously at 28%

For a small trader or a kirana business, the practical effect is that a lot of stock that used to be billed at 12% is now billed at 5%.

The New 40% Rate

The 40% rate is a demerit rate. It is not a general slab and most small businesses will never use it. It applies to items such as:

Pan masala, gutkha and chewing tobacco
Aerated and caffeinated beverages
Luxury vehicles

If you sell any of these, check the rate notification for your exact HSN code rather than assuming.

What Small Businesses Should Check

Update the tax rate master in your billing software or invoice template
Re-check the HSN or SAC code to rate mapping for every item you sell
Revise price lists, quotations and rate cards that still quote old slabs
Make sure invoices dated before and after 22 September 2025 carry the rate that applied on that date
Review input tax credit on old stock bought at the higher rate
Tell regular customers about any price change, in writing, before the next order

How Billing Software Helps

Every rate change means updating tax masters, re-checking HSN to rate mapping and reprinting price lists. Billing software that keeps GST rates current removes most of that work.

BharatBill.online lets you create GST invoices free, with tax rates, HSN/SAC codes and totals worked out for you.

Generate GST Invoice Free

What Happens Next

The 57th GST Council meeting was first listed for 12 September 2026 and has been rescheduled to 7 October 2026, because New Delhi is hosting the BRICS Leaders’ Summit on 12 and 13 September.

Items reported to be on the agenda include blocked input tax credit under Section 17(5), inverted duty refunds, further registration simplification, automated cancellation and a review of state revenue after GST 2.0. Nothing is decided until the Council meets and the official press release is issued, so treat any rate list circulating before then as speculation.

More GST Guides

Sources

Please note: this article is general information for small businesses and is accurate to the best of our knowledge on 18 September 2026. GST rules change often. Please confirm the current position on the official GST portal or with your tax adviser before acting on anything here.