Effective: 22 September 2025 | Category: Tax | Status: In force -- no further changes reported since the initial rollout.
Effective 22 September 2025, the GST Council replaced India's earlier four-slab GST structure (5%, 12%, 18%, 28%) with a simplified structure built around two primary rates -- 5% and 18% -- plus a new 40% de-merit rate for sin and luxury goods, implemented entirely through GST Council rate notifications under the existing CGST/IGST/State GST Acts, 2017, without any new GST statute.
What changed
The GST Council approved a rate rationalization that eliminated the 12% and 28% slabs: goods previously
taxed at 12% moved to either 5% or 18%, and most goods previously at 28% moved to 18%. Sin goods (tobacco,
pan masala) and select luxury goods (large cars, yachts) now attract a new 40% de-merit rate instead of the
earlier combination of the 28% slab plus a separate compensation cess, and the compensation cess mechanism
itself was wound down, though transitional cess arrangements continue on some tobacco products tied to
earlier loan-repayment obligations. The change was implemented entirely through GST Council recommendations
and rate notifications under the existing Central GST Act, 2017, Integrated GST Act, 2017, and State GST
Acts, 2017 -- no new GST legislation was required, and the underlying compliance framework (registration,
input tax credit, returns filing) is unchanged.
Why it matters for NRIs
Any NRI running an Indian business, e-commerce operation, or investment that involves GST-rated goods or
services needs to confirm their invoicing systems, HSN/SAC rate masters, and pricing reflect the new slabs,
since continuing to bill at a pre-reform rate can trigger short-payment demands and interest despite no new
compliance obligation having been created. NRIs planning large purchases in India -- vehicles, consumer
durables, or renovation materials for an inherited property, for example -- should also account for the
revised rates when budgeting, since the effective price of many goods shifted meaningfully overnight on 22
September 2025.
Articles on this platform affected by this change
This platform's Goods & Services Tax (GST) Law in
India article was updated to reflect GST 2.0 in full. No other article on this platform required a
correction as a result of this change, since GST rate detail was otherwise confined to that one dedicated
article rather than repeated piecemeal elsewhere.
Did GST 2.0 require Parliament to pass a new GST law?
No -- the rate changes were implemented through GST Council recommendations and rate notifications under
the existing CGST Act, 2017, IGST Act, 2017, and related State GST Acts, rather than through new primary
legislation.
Is there still a 12% or 28% GST slab after this change?
No -- both slabs were eliminated effective 22 September 2025, with affected goods moved to the 5% or 18%
slabs, or, for sin and luxury goods, to the new 40% de-merit rate.
Do businesses need to re-register or complete any new compliance step because of GST 2.0?
No -- the underlying compliance framework (registration, input tax credit, returns filing) is unchanged.
What changed is the rate applicable to specific goods and services, so the practical step is updating
invoicing and pricing systems to the current rate, not any new registration or filing obligation.
