New GST Rates 2026 (0/5/18/40): The Complete Guide to GST 2.0

On 22 September 2025, India's biggest indirect-tax reset since GST launched in 2017 came into force. GST 2.0 collapsed the old four-slab structure (5%, 12%, 18%, and 28%) into a simpler set of rates by removing the 12% and 28% slabs entirely. What remains in 2026 is four rates: 0%, 5%, 18%, and 40%. For shoppers, small businesses, and anyone raising an invoice, the practical questions are the same - which rate applies now, and how do you calculate it? This guide answers both with real examples.

What Changed Under GST 2.0?#

The reform had a single goal: simplification. Two of the four slabs were retired and their items redistributed. The result is a cleaner structure where most goods and services now sit at either 5% (essentials) or 18% (the standard rate), with 0% for exempt basics and a new 40% rate reserved for luxury and sin goods.

• 0% - exempt essentials (fresh food, milk, healthcare, education)
• 5% - everyday goods (packaged food, footwear, common medicines)
• 18% - the standard rate for most goods and services
• 40% - luxury and sin goods (tobacco, aerated drinks, luxury cars)

The Four GST Slabs in 2026, Explained#

Here is what falls under each of the four current slabs. Most of the confusion after GST 2.0 comes from items that moved, so the examples below reflect the post-reform positions - not the old ones.

• 0% (nil): fresh fruits and vegetables, unbranded food grains, milk, eggs, fresh meat and fish, books, and healthcare and basic education services.
• 5%: packaged and branded food, tea, coffee, edible oils, footwear, apparel, common medicines, domestic LPG, and non-AC rail travel.
• 18% (standard): most services (restaurants, telecom, banking, IT), most manufactured goods, and - after GST 2.0 - electronics like TVs, ACs, refrigerators and mobiles, plus small cars.
• 40%: tobacco and pan masala, aerated and sugary drinks, luxury cars and SUVs, and betting or casino services.

Where Did the Old 12% and 28% Items Go?#

No item became untaxed overnight - they were reassigned. As a rule of thumb, most 12% items moved down to 5% or up to 18%, and most 28% items moved down to 18%, while genuine luxury and sin goods were carved out into the new 40% slab.

• Old 12% items: mostly to 5% or 18% - many packaged foods and household items are now cheaper at 5%.
• Old 28% items: mostly to 18% - many electronics and appliances got cheaper.
• Luxury and sin goods: to the new 40% slab - tobacco, aerated drinks, and high-end cars.

How to Calculate GST: Adding vs Removing#

There are two everyday GST calculations. Adding GST (exclusive mode) starts from a base price and adds the tax - useful when preparing an invoice. Removing GST (inclusive mode) extracts the tax already baked into a price - useful when you want the pre-tax value of something you bought, since all Indian MRPs are GST-inclusive.

• Add GST: GST amount = base x rate / 100, then total = base + GST. Example: ₹1,000 base at 18% gives ₹180 GST and ₹1,180 total.
• Remove GST: base = total x 100 / (100 + rate). Example: ₹1,180 inclusive at 18% gives a ₹1,000 base and ₹180 GST.
• Within a state, GST splits equally into CGST and SGST (9% + 9% on an 18% item). Across states, a single IGST of 18% applies instead.

Quick Slab Reference for Common Purchases#

Not sure which slab applies? These are the rates you will meet most often in 2026.

• Groceries and common medicines: 0% or 5%
• Eating out, phone bills, and most shopping: 18%
• Electronics - mobiles, TVs, ACs, refrigerators: 18%
• Small cars: 18%; luxury cars and SUVs: 40%
• Cigarettes, pan masala, and aerated drinks: 40%

The Bottom Line#

GST 2.0 made India's tax structure simpler and, for many everyday and electronic goods, cheaper. Remember three numbers - 5% for essentials, 18% for almost everything, and 40% for luxury - and you will get most bills right. For the exact tax on any amount, including the CGST and SGST split, use the calculator.