The short version: four slabs became two
On 3 September 2025, the 56th GST Council approved the biggest rate rationalisation since GST began. From 22 September 2025, the 12% and 28% slabs are gone. Almost everything that sat in 12% moved down to 5%, and almost everything in 28% moved down to 18%. That leaves two main slabs — 5% for merit goods and 18% as the standard rate — plus 0% for a list of essentials and a new 40% rate for demerit and luxury goods.
For a shop owner, this is not a small tweak. Rates changed on soaps, shampoos, biscuits, clothes, footwear, appliances, cement and dozens of other everyday categories at the same time. If you sell any of these, your item masters, MRPs and bills all needed to change on the same day — and if you have not fully caught up yet, this article gives you the category-wise picture.
The 2025-26 slab structure at a glance
Here is the structure that applies for FY 2025-26 onwards. 0% covers a set of essentials: UHT milk, pre-packaged paneer, notebooks and exercise books, pencils, printed books, sanitary napkins, and a large list of medicines including many life-saving drugs. 5% is the merit rate for most daily-use goods — packaged foods, spices, edible oil, biscuits, namkeen, toothpaste, soap, shampoo, and apparel or footwear up to ₹2,500 a piece.
18% is the standard rate for everything that is neither essential nor demerit: electronics, mobiles, appliances, furniture, hardware, cement, watches, bags and most services. 40% is the new demerit rate for aerated and sweetened drinks, motorcycles above 350cc, luxury cars and similar goods. And the 3% rate on gold and silver jewellery is unchanged — jewellers can relax, nothing moved there.
What got cheaper on the grocery and personal-care shelf
Kirana and supermarket shelves saw the widest changes. Personal care took the biggest cut: soap, shampoo, toothpaste, toothbrushes and shaving preparations dropped from 18% to 5%. On a shampoo bottle with a base price of ₹200, tax falls from ₹36 to ₹10 — a ₹26 difference the customer expects to see reflected in the price.
Most packaged foods that were at 12% — butter, ghee, packaged namkeen, sauces, juices, and similar items — moved to 5%. UHT milk and pre-packaged paneer went from 5% to nil. In stationery, notebooks and exercise books became 0%, so a school-supplies counter now bills notebooks, pencils and printed books all without GST, while pens stay at 5%.
Medicines mostly settled at 5%, with a set of critical and life-saving drugs at 0%. Individual life and health insurance policies also became GST-free — not something you bill, but worth knowing as a business owner paying your own premiums.
Apparel and footwear: the threshold moved to ₹2,500
Garment and footwear shops got a double change. Earlier, the dividing line was ₹1,000 per piece — apparel above it attracted 12%, and footwear above it 18%. From 22 September 2025, the threshold is ₹2,500: anything with a sale value up to ₹2,500 per piece or pair is 5%, and anything above it is 18%.
The practical effect is big in the middle of the range. A ₹1,800 shirt that carried 12% now carries 5%. A ₹2,200 pair of shoes that carried 18% now carries 5%. But a ₹3,000 kurta set that was at 12% is now at 18% — so premium apparel between ₹2,500 and higher price points actually got costlier. If you sell across price bands, your billing software must apply the rate based on the per-piece sale value, not a flat rate for the category.
Appliances, electronics and building materials
The 28% slab is history, and that mainly benefits durables. Air conditioners, refrigerators, washing machines, dishwashers and large TVs moved from 28% to 18%. On an AC with a base price of ₹30,000, GST drops from ₹8,400 to ₹5,400 — a straight ₹3,000 off the customer's bill, which is why the change landed just before the festive season.
For hardware and building-material shops, cement moved from 28% to 18%, and items like paints and tiles that were already at or moved into 18% now sit in one clean slab. Motorcycles and scooters up to 350cc also came down from 28% to 18%, while small cars saw similar relief. Mobiles, laptops and most electronics were already at 18% and stay there — no change needed on those shelves.
The 40% rate: what got costlier
The new 40% demerit rate replaces the old 28%-plus-cess treatment for a short list of goods. For retailers, the one that matters most is aerated and sweetened soft drinks — colas and similar carbonated beverages now attract 40% GST. If you run a general store or a cold-drinks counter, this is the line item to double-check in your rate master, because getting it wrong under-collects tax by a wide margin.
Motorcycles above 350cc, luxury cars, yachts and similar goods also sit at 40%. Tobacco products are the special case: they continued at the old 28%-plus-cess structure for a transition period, and moved to 40% with an additional excise levy from 1 February 2026. Pan-masala and tobacco counters should confirm current rates on the GST portal, as this category carries valuation rules of its own.
What shop owners should actually do
First, fix your rate masters. Go item by item — or at least HSN by HSN — and update the GST rate against every product in your billing software. The risky items are the ones that changed: personal care (18 to 5), packaged foods (12 to 5), apparel and footwear around the ₹2,500 line, appliances and cement (28 to 18), and soft drinks (to 40). If your software carries rates at the category or HSN level, one correction fixes every item under it. Our free HSN code finder at retaildek.com/tools/hsn-code-finder/ already carries the post-September 2025 rates, so you can look up any category and cross-check what your system should be charging.
Second, handle old stock correctly. GST is charged at the rate in force on the date of sale, not the date you purchased the stock. So pre-22-September stock sells at the new rate, even though you paid the old rate on purchase — your input tax credit on those purchases remains available as usual. For MRP-printed goods, the government allowed revised MRP stickers on unsold stock alongside the original printed MRP, so reprice visibly rather than billing above a now-wrong MRP.
Third, re-check your pricing. Where rates fell, customers and consumer-protection rules expect the benefit to reach the shelf price — quietly keeping the difference invites complaints. Where rates rose (premium apparel, soft drinks), your margins take the hit unless you reprice. Do the arithmetic per item once, update the MRP or sale price, and let the software do the rest on every bill after that.