The Goods and Services Tax (GST) is a comprehensive, multi-stage, destination-based tax that has been revolutionary in the indirect taxation scenario in India. In July 2017, GST merged various indirect taxes under one uniform taxation framework in India. The GST Council has regularly reviewed and updated rates over the years in a bid to keep pace with the nation’s changing economic requirements. Let’s look at different types of GST rates in India, the new GST rate list, and the summary of recent changes in the council meetings.

Understanding GST Rates in India

The GST rates in India are separated into slabs, which applies to certain types of services and products. This division guarantees that necessities are taxed at a lower rate and luxury and sin goods at a higher rate. Here’s a short explanation of GST’s significance and impact on businesses and customers.

1. Basic Concept of GST Rates
   Businesses that are GST-registered must levy tax as per the applicable rate on the items and services they provide. The GST rate is the tax shown as a percentage of the value of the taxable property. For instance, if a product costs INR 20,000 and it has a 12% GST rate then the GST for that product will be INR 2,400. The current GST rate in India is from 0% to 28%, with certain products and services being subject to additional cess.
2. Types of GST Rates
   The GST rate structure is carefully thought out in order to tax everyday essentials at a lower rate while high taxes are levied on luxury and sin items. Here are the major GST rate slabs defined in India.

Nil Rate (0%): Key commodities and services like raw food products, education services and medical services come under this category and are not subject to GST.

5% Rate: Items of mass consumption and social value, such as packaged food products, footwear below a certain amount and essential items are taxed at this rate.

12% Rate: The slab includes processed foods, certain drugs and intermediates.

18% Rate: Regular goods and services such as the bulk of consumer goods, industrial intermediaries, and services are subjected to this rate.

28% Rate: High-end goods, sin products like tobacco and carbonated drinks, luxury consumer durables are the items taxable in this upper tax bracket.

Some products are subject to special tax, such as 3% for precious metals like gold and silver and 0.25% for semi-precious stones. For composition taxpayers, nominal GST of 1.5%, 5%, or 6% may be applicable.

Read more: Types of GST

New GST Rate List

The GST Council had its 54th meeting on 8 October 2024 and recommended a few GST rate amendments to deal with the revenue issue and correct inverted duty arrangements. These changes were later announced by the Central Board of Indirect Taxes and Customs (CBIC). Let’s view the new GST rate list for essential, standard and luxury goods and services.

GST Rates for Essential Goods (0% GST Rate)

GST Rates for Essential Goods (5% GST Rate)

GST Rates for Standard Goods (12% GST Rate)

GST Rates for Consumer Goods (18% GST Rate)

GST Rates for Luxury and Sin Goods (28% GST Rate)

Special GST Rates for Specific Products

GST Rates for Services (Select Examples)

Summary of Recent Changes in GST Rates from Recent Council Meetings

Recent GST Rate Changes by Industry

The GST Council frequently alters the rate of goods and services to meet sectoral requirements. Below is a summary of key sectoral rate changes in recent meetings.

1. Food and Beverages Sector
   Recently, the GST rate for food and beverage services in cinema halls has been reduced from 18% to 5% when they are provided separately. The Council also decreased GST on raw and non-fried snack pellets from 18% to 5%.
2. Health and Medical Supplies
   The 54th GST Council reduced GST rates of cancer drugs from 12% to 5% making life-saving drugs more affordable for patients. Even certain medical and research services to government agencies were exempted by the Council.
3. Renewable Energy and Environment-Friendly Products
   GST for items such as solar cookers irrespective of their source of energy is fixed at 12%, earlier it was variable. Eco-friendly items such as LD slag and imitation zari thread also got GST deductions to promote the green movement.
4. Services Sector
   The GST exemptions were extended to public water supply, certain medical services and housing above certain rent limits. Moreover, services offered by Indian Railways like battery cars and intra-railway transactions were exempted.
5. Education and Charitable Services
   Benefits from exemptions on education by charitable trusts, some insurance policies, and religious services reduce the cost to recipients. Exemptions from GST are also granted to charitable organizations authorized under Section 12AA, further facilitating the provision of social welfare services.

Read more: Search GST number

HSN and SAC Codes in GST Rate Classification

Part of GST registration is the implementation of the Harmonized System of Nomenclature (HSN) and Service Accounting Codes (SAC) for goods and services classification. Let’s see how such systems function in the GST regime.

1. HSN Code System for Goods
   The HSN system, developed by the World Customs Organization, identifies traded commodities in a structured manner that assists international trade. HSN codes are composed of six or eight digits and each level provides more precise item identification. For instance, the HSN code of rice “1006” indicates that it is in the cereal category. Here is the format of the HSN code system.

• Starting Two Digits: Mentions the chapter number (general category).
• Next Two Digits: Mentions the heading (subcategory).
• Following Two Digits: Mentions the subheading (more specific classification).

For instance, the HSN code for rice is “1006,” where:

• 10 refers to the chapter on cereals.
• 06 is specific to rice.

HSN codes, when properly used, can result in accurate taxation and organized customs documentation and avoid classification disputes.

2. SAC Code System for Services
   India’s CBEC’s SAC system operates the same way for services and separates them into different service segments like legal services, telecommunications, and transportation. Every SAC code helps to identify the specific service type and GST rate for it.

Read more: GST payment

HSN and SAC Codes Help Determine the Appropriate GST Rate Slab

GST rates in India are determined based on the categories of goods and services as per HSN and SAC codes as these codes directly impact the tax rate levied. The GST Council decides tax rates based on the HSN/SAC code to ensure taxation in India is uniform and fair.

• Essential Goods and Services (Lower Slabs): Essential products and services such as uncooked food, public transportation, and education are given HSN and SAC codes which are equal to the GST rate ranging from 0% or 5%.
• Standard Goods and Services (Mid Slabs): Products such as processed food, electronic goods, industrial items etc. falls in 12% or 18% slabs. For each of these products and services, there are separate HSN/SAC codes associated with their type.
• Luxury and Sin Goods (Highest Slab): Luxury goods, tobacco products and high-end consumer goods usually fall under 28% tax category and the HSN codes uniquely mark them in this tax slab.

Read more: GST Registration Requirements

Ensuring Compliance, Precision, and Process Efficiency

HSN and SAC codes are the backbone of applying the right GST rate slab to ensure proper tax classification and compliance for all products and services. The categorization ensures that taxation remains systematic and just under India’s GST regime.

• Tax Calculation Accuracy: Using the right HSN or SAC code will allow businesses to calculate the right GST rate and eliminate tax mistakes that could incur penalties.
• Simplified Filing and Documentation: HSN and SAC codes help to reduce paperwork for the GST system because these codes specify the tax rate for each item or service. This makes it less ambiguous and also makes GST filing easy.
• Consistency Across India: HSN and SAC codes are standardized so similar goods and services will be taxed similarly across the country to avoid regional differences.

Read more: Financial Accounting

Key Takeaways and GST Rate Revisions from Recent Council Meetings

The GST Council has held several meetings since GST was introduced, all helping to define India’s GST framework. Below are some of the more prominent outcomes from recent meetings.

1. 54th GST Council Meeting (2024)
   The Council recommended GST reduction on certain cancer drugs, RCM on metal scrap transactions, and a more transparent classification under the HSN code system. It even cut the tax rate of nankeens and similar products to make them cheaper.
2. 53rd GST Council Meeting (2024)
   The meeting was geared towards rationalizing GST rates for goods such as milk cans that now are equally taxed at 12%. Solar cookers that were previously variable rates are now under the 12% slab. The exemption was extended to a number of services offered by Indian Railways and to some hostels that provide accommodation within set rent parameters.
3. 50th GST Council Meeting (2023)
   The Council exempted from GST some food products and medications for rare diseases. They also took other moves like cutting GST on imitation zari thread, fish soluble paste and snack palettes. The Council also proposed small business-oriented measures, like lowering late fees for GSTR-3B returns without a taxable income.
4. 48th GST Council Meeting (2023)
   Significant decisions involved changing the GST rates for services like data logging. Cattle feed and bio-medical waste services were exempted, encouraging growth in these industries.

Also Read: How to search GST Number 

Conclusion

GST rates in India are designed to keep necessities affordable while collecting profit from luxuries and non-essential products. The GST Council, with its regular audits, keeps these rates relevant to the economy. The GST rate structure (0%, 5%, 12%, 18%, and 28%) combined with special rates creates a progressive tax regime for economic development and consumer welfare.

Understanding the GST rate list and keeping up to date with its revisions will help businesses and consumers make well-informed choices and benefit from a transparent tax regime which will help streamline India’s economy. The GST regime continues to evolve to keep pace with the demands of India’s dynamic economy while facilitating inclusive growth.

FAQs

What are the GST rate slabs in India?

The GST rates in India are classified into five slabs – 0%, 5%, 12%, 18% and 28%. There are also special rates of 0.25% and 3% on certain products, such as precious stones and gold, respectively. These tax slabs ensure that essential goods are less taxable and luxury and non-essential items are taxed higher.

Who decides the GST rates in India, and how often are they revised?

The GST Council (the group of delegates from central and state governments) sets the GST rates in India. Rates are reviewed and updated periodically by the Council to reflect economic demands and industry trends.

What is an HSN code, and how does it relate to GST rates?

The Harmonized System of Nomenclature (HSN) is a globally accepted code system for goods. With GST, each HSN code is linked to a certain GST rate to maintain consistency in taxes on different types of goods.

What is a SAC code and what is its significance for service providers under GST?

The ​​Service Accounting Code (SAC) is a special code used to categorize services under GST. It works like HSN codes but is for services. The correct SAC codes make sure that the services get correctly categorized and are taxed the correct GST rate, to avoid compliance issues.

How does the GST rate on transport of goods by road vary by provider?

The GST rate on the transport of goods by road is 5% under reverse charge, wherein the recipient is paying whereas under forward charge wherein the provider is paying, the tax rate is 12%. Non-GTA (Goods Transport Agencies) operators are typically exempted from GST.

Are all essential items exempt from GST?

No, not all basic needs are GST-exempt. Taxes on some necessities are 0%, for instance, fresh fruits, milk, and education services. However, some basic needs, such as packaged foods and household LPG, are subject to the 5% GST slab.

Can businesses claim Input Tax Credit (ITC) on all GST payments?

Companies can receive ITC on purchases and expenses paid for under GST, provided that these are related to taxable sales or services. But ITC cannot be claimed for personal use or exempt goods/services, and certain tax rates, such as for the 5% RCM on GTA, ITC is not granted.

What happens if a business uses an incorrect HSN or SAC code?

If a business uses the wrong HSN or SAC code, incorrect GST rates will be used, which can result in penalty, deferment, or withdrawal of input tax credits and filing issues.

Are GST rates uniform across all states in India?

Yes, GST rates in India are the same throughout goods and services, according to the GST Council. This single structure eliminates state-by-state variation and builds a unified market.

How can businesses find the correct GST rate for a specific product or service?

The HSN or SAC code of the product or service can help businesses calculate the right GST rate. For instance, CBIC’s HSN and SAC finder or GST portals can help identify rates and ensure accurate categorization and compliance.