GST 2.0: New GST Rates and Invoice Changes

Quick answer: The new GST rates under GST 2.0 took effect on 22 September 2025. India moved to two main slabs, 5% and 18%, plus a special 40% rate for luxury and "sin" goods, with essentials at nil. The 12% and 28% slabs were folded into these. Your GST invoice format stays the same, but you must update HSN rates and apply the rate-change rules correctly.

GST 2.0 is the biggest change to India's GST rates since GST began in 2017. If you issue GST invoices, the practical questions are simple: which rate applies to each item now, what to do with invoices that straddle the change date, and whether anything on the invoice itself must change. This guide answers those. For field-by-field invoice rules, see our GST invoice guide.

Important: This is general information, not tax or legal advice. Rates are fixed by CBIC notifications for each HSN or SAC code, and the GST Council can revise them. Check the official GST Council site and the GST portal, or ask a chartered accountant, before setting a rate in your billing software.

What is GST 2.0?

"GST 2.0" is the popular name for the rate rationalization recommended by the 56th meeting of the GST Council on 3 September 2025. The government notified the new rates on 17 September 2025, and they applied from 22 September 2025. The aim was a simpler structure with fewer slabs, lower tax on everyday goods and fewer classification disputes.

	Before 22 September 2025	From 22 September 2025 (GST 2.0)
Main slabs	5%, 12%, 18%, 28%	5% and 18%
Special rate	28% plus compensation cess on many luxury and sin goods	40% on specified luxury and sin goods
Nil rate	Essentials	Essentials, plus individual life and health insurance
Compensation cess	On cars, tobacco, aerated drinks and others	Withdrawn on most goods; tobacco kept on the old structure for a transition period

New GST rates: what moved where

The full list runs to hundreds of HSN entries, so use this as orientation, not as your rate table.

28% to 18%

• Air conditioners and dishwashers
• LED and LCD televisions above 32 inches, monitors and projectors
• Small cars (petrol up to 1,200 cc and diesel up to 1,500 cc, within 4,000 mm length)
• Motorcycles up to 350 cc, three-wheelers and goods transport vehicles

12% (and some 18%) to 5%

Many packaged foods, personal care items and household goods moved down to 5%. Some services also moved to 5%, in several cases without input tax credit (for example, reported changes for hotel accommodation up to Rs 7,500 per night and for beauty and fitness services). Where a 5% rate comes "without ITC", you cannot claim input tax credit on related purchases, which changes your pricing maths.

To 40%

• Pan masala, tobacco products and cigarettes (tobacco moved once the transition period ended)
• Aerated and sugary drinks
• Larger cars and motorcycles above 350 cc
• Yachts, private aircraft and similar luxury items

To nil

Individual life and health insurance policies became exempt, along with a number of essential goods and medicines.

How the GST rate cut affects your invoices

The GST invoice format did not change. Rule 46 of the CGST Rules still sets the mandatory fields, and e-invoicing taxpayers still need an IRN (see our guide to the e-invoice limit in GST). What changes is the rate on each line, and that has knock-on effects:

• Item master: update the rate for every HSN or SAC code you sell. A single wrong code can mean under-charging tax you then owe yourself.
• Price lists and quotes: quotations issued before the change at the old rate need re-issuing. Our invoice vs quotation explainer helps if your team mixes the two.
• Cess fields: remove compensation cess from items where it no longer applies.
• Recipient side: your buyers see the new rate in GSTR-2B through the Invoice Management System (IMS), so wrong rates lead to rejected invoices.

Which rate applies when a sale straddles 22 September 2025?

Section 14 of the CGST Act decides the time of supply when the rate changes. It looks at three events: the date of supply, the invoice date and the date payment is received. In simple terms, the rate that applies is the one in force when two of those three events happened.

Supply	Invoice	Payment	Rate applied
Before	Before	After	Old rate
Before	After	Before	Old rate
Before	After	After	New rate
After	Before	Before	Old rate
After	Before	After	New rate
After	After	Before	New rate

"Before" means before 22 September 2025, "after" means on or after it. The change is a year old now, but these rules still matter for late invoices, credit notes on older sales and audits of the 2025-26 return, and the same Section 14 logic will apply to any future rate change.

Worked example: an AC dealer's GST invoice

A dealer in Pune (Maharashtra) sells an air conditioner and installation to a business customer in the same state. Air conditioners moved from 28% to 18%. Installation is shown as a separate service line at 18% here for illustration; check whether your supply is composite in your case.

Line	Taxable value (Rs)	CGST 9% (Rs)	SGST 9% (Rs)	Line total (Rs)
Split AC, 1.5 ton	40,000.00	3,600.00	3,600.00	47,200.00
Installation	2,500.00	225.00	225.00	2,950.00
Totals	42,500.00	3,825.00	3,825.00	50,150.00

The maths: 18% on Rs 42,500 = Rs 7,650, split equally as CGST Rs 3,825 and SGST Rs 3,825 because the sale is intra-state. Total Rs 50,150. Under the old 28% rate, tax on the AC alone would have been Rs 40,000 × 28% = Rs 11,200 instead of Rs 7,200, so the customer pays Rs 4,000 less tax on that line. If the buyer were in Karnataka, the dealer would charge IGST at 18% (Rs 7,650) instead of CGST plus SGST. Our tax calculator works for GST percentages too.

GST slabs 5%, 18% and 40%: quick reference

Rate	Typical goods and services	Invoice tip
Nil	Essentials, individual life and health insurance	Use a bill of supply if all supplies are exempt
5%	Many everyday goods; some services without ITC	Note "ITC not available" internally where it applies
18%	Most goods and services, including many former 28% items	Default for most B2B services
40%	Sin goods and luxury items	Check whether any separate levy also applies

How to update your billing for GST 2.0 rates

Whether you use an ERP, accounting software or a spreadsheet, the update follows the same steps. Doing them in order avoids the most common errors.

1. List every HSN and SAC code you use. Pull a sales report by code for the last 12 months, plus any codes on open quotes and purchase orders.
2. Look up the current rate for each code in the CBIC rate notifications, not in a blog list. Note any condition attached, such as "without ITC".
3. Update the item master and remove compensation cess where it no longer applies. Keep a record of the old and new rate for each item.
4. Test a sample invoice for an intra-state and an inter-state customer, and check the CGST, SGST or IGST split.
5. Update e-invoice and e-way bill settings if you generate IRNs: the JSON carries the rate per line, and the IRP validates rate and tax arithmetic.
6. Reprice and communicate. Update price lists and tell regular customers how prices changed.

Businesses that bill by hand should take extra care with the last digit of HSN codes: two products that look alike can sit in different headings and now carry different rates. When in doubt, ask your chartered accountant for a classification opinion and keep it on file.

Common mistakes after the new GST rates

• Updating some HSN codes, not all. Run a report of every code you sold in the last year and check each one.
• Leaving cess on the invoice. Charging cess that no longer applies over-collects from your customer.
• Applying the new rate to a pre-change invoice. Use the Section 14 table above for credit and debit notes on old sales. Our debit note vs credit note guide explains which to issue.
• Claiming ITC on "without ITC" services. Some 5% services carry no credit, for you or for your supplier.
• Reusing old quotes. A quote at 28% accepted after the change still invoices at the new rate if the Section 14 test says so.

GST 2.0 invoice checklist

• Item master updated with the current rate for every HSN or SAC code
• Compensation cess removed where withdrawn
• Correct CGST plus SGST or IGST based on place of supply
• Rate-change date logic applied to straddling transactions
• Price lists, website prices and quotes reissued
• Credit notes on old sales use the old rate where Section 14 requires it
• Records of repricing kept in case of profiteering queries

Can I make a GST invoice with a free generator?

If your aggregate turnover is below the e-invoicing limit, a clear PDF tax invoice with all GST fields is normal practice. Our free invoice generator lets you enter each line's rate and shows the tax, and it runs in your browser without an account. It does not look up HSN rates, split CGST and SGST automatically by place of supply, or generate an IRN, so you must enter the correct rate yourself. Above the e-invoice limit, use GST software that connects to an IRP.

Next step

Export your sales by HSN code for the last 12 months and confirm the current rate for each one against CBIC's notifications. Then check how your buyers are treating your invoices in IMS, using our guide to the GST Invoice Management System.