GST 2.0: The Biggest Rate Change Since 2017
On 22 September 2025, India switched to a simplified GST structure that the 56th GST Council nicknamed "GST 2.0." The old four-slab system (5%, 12%, 18%, 28%) was collapsed into a cleaner set of rates. For most small businesses this is good news — fewer slabs mean fewer classification mistakes — but every invoice raised on or after that date must reflect the new rates.
If your billing software, POS, or printed price list still uses the old slabs, you are issuing non-compliant invoices. This guide gives you the full updated list and a clear action plan.
The New GST Slabs at a Glance
GST 2.0 works on four headline rates:
- 0% (Nil): Essential and merit goods — most fresh food, many life-saving drugs, educational items like notebooks and pencils, and individual life and health insurance.
- 5%: Daily-use items, packaged food, agricultural goods, healthcare equipment, and most mass-consumption products that earlier sat at 12%.
- 18%: The standard rate for the majority of goods and services — most electronics, appliances, small cars, and professional services. Many items that were at 28% moved down to here.
- 40%: A special rate for "sin" and luxury goods — pan masala, aerated and caffeinated drinks, tobacco, and luxury vehicles.
The 12% and 28% slabs have effectively been removed. Items did not disappear — they were redistributed up or down.
What Moved Where
A few examples that affect everyday retail and trade:
- Down to 0%: Many dairy products, 33 life-saving drugs, and back-to-school items such as notebooks, pencils, crayons, and maps.
- Down to 5%: Several daily essentials, agricultural goods, and healthcare equipment that previously attracted 12% or 18%. Diagnostic kits, thermometers, and glucometers dropped from 12-18% to 5%.
- Down to 18%: Air conditioners, large televisions, dishwashers, small cars, and motorcycles that earlier carried 28% — roughly 10 percentage points cheaper for the end customer.
- Up to 40%: Pan masala, aerated and caffeinated beverages, and luxury vehicles.
Because exact HSN-level classification matters, always confirm the rate for your specific product against the official notification or a current rate finder before updating your masters.
What This Means for Your Small Business
Three practical consequences:
- Your invoices must use the new rate from 22 September 2025 onward. The date of supply determines the rate, not the date you bought the stock.
- Your selling price may change. If an item moved from 28% to 18%, your customer-facing price can drop while your margin stays the same. If it moved up, plan the increase.
- Input tax credit (ITC) timing matters. Stock you purchased earlier at a higher rate still carries the ITC you actually paid — you do not lose it just because the output rate changed.
Handling Old Stock Bought at the Old Rate
This is the question that confused the most owners during the transition. The rule is simple: the rate is decided at the time of sale, not the time of purchase.
If you bought a product when it attracted 28% GST and you sell it after 22 September 2025 when it attracts 18%, you charge 18% on the sale. The input credit you claimed at 28% remains valid. You do not need to reverse it or re-price your historical purchases. Just make sure your sale invoice reflects the current rate.
How to Update Your Billing and POS
The businesses that struggled most in September 2025 were the ones whose software did not update in time, or who did not know which items changed. Your checklist:
- Update the GST rate against every product or HSN code in your item master.
- Update printed price lists, menu cards, and shelf labels.
- Re-check any recurring invoices and quotations created before the change.
- Confirm your software applies the rate by date of supply, so historical invoices keep their original rate and new ones use the new one.
Modern cloud billing software updates rate masters centrally, so you are not manually editing hundreds of products. InfiBis keeps GST rates current and applies the correct rate automatically based on the invoice date.
A Note for Composition Dealers
If you are registered under the composition scheme, the headline slab changes do not change your composition rate. Composition dealers continue to pay a fixed percentage of turnover (1%, 1.5%, or 6% depending on business type) and do not charge GST separately to customers. The slab reform applies to the regular scheme.
Conclusion
GST 2.0 simplified the tax structure, but it put the responsibility on every business to update its rates correctly. The action is straightforward: refresh your item master, fix your price lists, and make sure your software applies rates by date of supply. Once that is done, the new structure is genuinely easier to work with than the old four-slab system. For a step-by-step on raising a compliant invoice under the new rates, read our guide on how to create a GST invoice in India, and if you cross the turnover threshold, see whether you need to comply with e-invoicing.