GST Rate Structure Explained: 5%, 12%, 18%, 28% & Exempt Supplies

The rate slabs

• 0% - essential items: unprocessed food grains, fresh vegetables, milk, books, newspapers, health and education services
• 0.25% - rough precious and semi-precious stones
• 3% - gold and gold jewellery (rough stones fall here), silver goods
• 5% - packaged food, transport services, certain restaurants, AC hotels under thresholds
• 12% - processed food, fruit juices, certain electronics, business-class hotel rooms, telecom
• 18% - most services (SAC-based), consumer durables, furniture, paints
• 28% - luxury goods, cars, tobacco, aerated drinks, plus compensation cess on specified goods

Services classification (SAC)

Services are classified under Service Accounting Codes. 18% covers most business, professional, consulting and compliance services - including GST filing assistance, accounting and consultancy. Specific exemptions apply to many public services, education and healthcare.

RSTP key reminders

• State GST (SGST/UTGST) mirrors the CGST rate for intra-state supply; IGST applies for inter-state
• Exports and supplies to SEZ are zero-rated - claim refund of ITC
• Composition scheme taxpayers pay a flat rate (1% traders, 6% restaurants etc. on turnover) instead of slab rates
• Persons not registered cannot collect GST - reverse charge applies on certain notified supplies from unregistered suppliers

Impact on businesses

Correct rate selection is the single biggest source of GST disputes. A wrong 5% instead of 12% on a product line creates short-payment and interest; a wrong classification across states creates multiple-demand issues that are expensive to unwind.

What you should do

• Map every product and service to an HSN/SAC code and confirm the rate from CBIC schedules
• Print HSN (2, 4 or 6 digits per turnover slab) on all invoices
• Recheck rates annually when the tariff is updated
• For new categories, get a written classification note from your advisor before invoicing