GST Rate Slabs, Explained

The main slabs

Most goods and services fall into one of a handful of rate slabs:

• 0% (nil-rated) — many basic and unbranded food items, and certain essentials
• 5% — mass-consumption items, and many job-work and transport services
• 12% — a middle band of goods and services
• 18% — the most common rate for services and a large range of goods
• 28% — luxury and “sin” goods, sometimes with an additional cess

Special rates

Some categories sit outside the main slabs. Gold and gold jewellery are taxed at a concessional 3% (with 5% on making charges). Rough diamonds and a few other items have their own low rates. Restaurant services largely sit at 5% without input credit. Knowing when a special rate applies to your sector saves you from over- or under-charging.

Finding the right rate

The correct rate is tied to the HSN code (for goods) or SAC code (for services) of what you supply. The safest approach is to identify the precise HSN/SAC first, then apply the rate notified for it — not to guess from a similar product. Misclassifying to a lower rate is a classic cause of demand notices.

Why exempt is not the same as zero-rated

A subtle but important point: a 0% (nil-rated) or exempt supply carries no output tax, but it also generally blocks input tax credit on related purchases. A zero-rated supply (exports, SEZ) is different — it carries no output tax and lets you claim/refund input credit. Confusing the two leads to lost credit or wrong refund claims.