GST 2.0 One Year On: What Moved to 5%, 18% and 40%

Since 22 September 2025, GST has run on two main rates, 5% and 18%, with a special 40% rate for a short list of luxury and sin goods. The old 12% and 28% slabs were removed, and individual life and health insurance premiums became GST-free. Cigarettes and other tobacco products moved to the new rates later, on 1 February 2026.

Key facts

What GST 2.0 changed

The GST Council approved the “Next-Gen GST” package on 3 September 2025. CBIC notified the new goods rates on 17 September, and they applied to supplies made on or after 22 September 2025. The PIB FAQ confirms that supplies made up to 21 September 2025 kept the old rates.

The package did three things:

• Cut a four-rate structure down to two main rates, with a special rate on top.
• Cut rates on a long list of food, household, medical, farm and consumer goods.
• Folded the compensation cess into GST. Mid-size cars, for example, had paid 28% GST plus cess; they now pay a flat 40% with no cess.

Tobacco waited. The Council kept the old GST and cess on cigarettes, chewing tobacco, unmanufactured tobacco and bidis until the compensation cess loans were repaid. From 1 February 2026, pan masala, cigarettes and tobacco moved to 40% and bidis to 18%, All India Radio reported. A new Health and National Security Cess applies to pan masala, and tobacco carries an additional excise duty.

The new slab structure

A few special rates sit outside these slabs. Gold, silver, jewellery and coins still pay 3% (1.5% CGST plus 1.5% SGST), according to the CBIC ready reckoner. Our GST rates and slabs page lists rates by item; this page tracks what changed in the reform.

Items that moved down

A “small car” has a precise meaning here. The PIB FAQ defines it as a petrol, LPG or CNG car up to 1,200cc and 4,000 mm long, or a diesel car up to 1,500cc and 4,000 mm. Bigger cars fall in the 40% slab.

Not every change was a cut. Coal, which paid 5% plus a cess, moved to 18% when the cess was merged. Job-work services with no specific rate went from 12% to 18%.

Items in the 40% slab

The PIB release lists these goods at 40%:

• Pan masala, cigarettes and most tobacco products (from 1 February 2026).
• Aerated waters and drinks with added sugar or flavour, caffeinated beverages, and carbonated fruit drinks.
• Other non-alcoholic beverages, which moved up from 18%.
• Cars above the small-car limits, including large utility vehicles.
• Motorcycles above 350cc.
• Aircraft for personal use, yachts and pleasure boats.
• Revolvers and pistols, and smoking pipes.

On the services side, betting, casinos, gambling, horse racing, lottery and online money gaming pay 40%. Tickets to events such as the IPL also pay 40%. Recognised sporting events are not covered: tickets up to ₹500 stay exempt and costlier tickets pay 18%.

Insurance exemption

From 22 September 2025, premiums on individual life and health insurance policies are exempt from GST. Before that they paid 18%. The PIB FAQ lists what is covered:

• Life: all individual policies, including term, ULIP and endowment plans.
• Health: all individual policies, including family floater and senior citizen plans.

The exemption names only individual policies; group covers, such as those bought by an employer, are not mentioned. If you still see a GST line on an individual policy renewed after 22 September 2025, ask your insurer why. Health premiums may also count for tax relief; see our Section 80D page.

What to check on bills now

1. Look for the HSN code and the tax rate on the invoice. CBIC’s invoice flyer says a tax invoice must show both.
2. Match the rate against the tables above or the CBIC rate list. Butter billed at 12% or a TV at 28% is out of date.
3. For a car or motorcycle, check the engine size and length on the quote. That decides whether you pay 18% or 40%.
4. For insurance renewals, confirm the premium shows no GST on an individual policy.
5. Use the GST calculator to check that the tax amount matches the rate.

The next GST Council meeting, the 57th, was reported by JurisHour to have moved to 7 October 2026. Reports say its agenda is mostly procedural, covering registration, refunds and input tax credit. Nothing has been notified yet, so the rates above still apply.

If you run a business and are unsure which rate applies to a product, a GST practitioner can check the classification for you.

Frequently asked questions

When did GST 2.0 come into effect?

On 22 September 2025 for most goods and services. The new rates for tobacco and pan masala took effect on 1 February 2026.

What are the new GST slabs?

5% (merit rate), 18% (standard rate) and 40% (special rate). Some goods are Nil, and gold stays at 3%.

Has the 12% GST slab been removed?

Yes. Items that were at 12% moved mostly to 5%, and some to Nil or 18%.

Is there GST on health insurance now?

No, for individual policies, including family floater and senior citizen plans, from 22 September 2025.

Which cars attract 40% GST?

Petrol, LPG or CNG cars above 1,200cc or 4,000 mm, and diesel cars above 1,500cc or 4,000 mm. There is no separate compensation cess on them now.

Did any GST rates go up under GST 2.0?

Yes. Other non-alcoholic beverages rose from 18% to 40%, coal from 5% plus cess to 18%, and residuary job work from 12% to 18%.

Sources

• Recommendations of the 56th GST Council meeting — Press Information Bureau (checked 16 Sep 2026)
• FAQs on the decisions of the 56th GST Council — Press Information Bureau (checked 16 Sep 2026)
• GST Reforms 2025: Relief for Common Man, Boost for Businesses — Press Information Bureau (checked 16 Sep 2026)
• CGST rates on goods as on 22.09.2025, Notification 9/2025 — CBIC ready reckoner (copy hosted by A2Z Taxcorp) (checked 16 Sep 2026)
• February 1 date notified for tobacco levies — All India Radio News (checked 16 Sep 2026)
• Tax Invoice and other such instruments in GST (flyer) — CBIC / GST Council (checked 16 Sep 2026)
• 57th GST Council meeting postponed to 7 October 2026 — JurisHour (checked 16 Sep 2026)