GST 2.0: What the new rate rationalisation means for you

The GST Council approved a significant rate rationalisation in 2025. The changes took effect from 1 April 2026. This is not a minor adjustment. For many product categories, the effective tax burden changed by 4 to 6 percentage points.

What changed

The 12% slab has been largely eliminated. Items that were at 12% have moved either to 5% or 18% depending on the category. Items considered essential moved down. Items considered discretionary moved up. The number of line items in the 28% slab did not change significantly.

Services saw a parallel rationalisation. B2B professional services remain at 18%. B2C personal services, including beauty, fitness, and food delivery, moved from 18% to 12% for registered suppliers below 1.5 crore turnover.

What it means for your pricing

If your input costs were taxed at 12% and your outputs were also at 12%, your ITC claimed exactly offset your output tax. If inputs moved to 5% and outputs moved to 18%, you have a net tax increase on the delta. Many mixed-category businesses will need to recompute their effective tax burden and adjust pricing accordingly.

What to do now

Pull your purchase register for the last 6 months. Identify the top 10 input categories by value. Check whether each moved up or down in the rationalisation. Compute the net change in ITC available. Compare to the change in output tax liability on your main product or service category. The difference is either a benefit or a cost that flows directly to your margins.