GST Rate Slabs Explained: 0, 5, 12, 18 and 28 Per Cent, and How to Classify

The slabs

1. Nil rate: essential food items, fresh produce, educational services, healthcare services and a long list of specified goods.

2. Five per cent: mass-consumption items, transport services, economy air travel, and specified job work.

3. Twelve per cent: processed foods, business-class air travel, and a range of intermediate goods.

4. Eighteen per cent: the residual rate, and the one most services default to.

5. Twenty-eight per cent: luxury and demerit goods, generally with compensation cess on top.

Precious metals carry a separate rate of three per cent, and rough diamonds a special rate of a quarter of one per cent.

Composite supply takes the principal rate

A composite supply is two or more supplies naturally bundled and supplied together in the ordinary course of business, one of which is the principal supply. Section 8(a) rates the whole at the rate applicable to the principal supply.

The classic example is goods supplied with insurance and freight: the goods are the principal supply, and the whole invoice takes the goods rate even though transport and insurance would attract different rates on their own.

Mixed supply takes the highest rate

A mixed supply is two or more supplies made together for a single price that are not naturally bundled. Section 8(b) rates the whole at the highest rate among the components.

A festival hamper containing sweets, chocolates and a steel container is the standard illustration: nothing about the bundle is natural, so the highest rate in the box applies to the entire hamper. The commercial lesson is that pricing items separately on the invoice, where they genuinely are separate, avoids the uplift.

Classification is where the disputes are

The HSN or SAC you put on an invoice is an assertion about what you are supplying. Classification disputes — whether a flavoured milk drink is a milk product or a beverage, whether a particular software arrangement is goods or services — run for years and carry retrospective demands.

Where the position is genuinely unclear, an advance ruling under Section 97 gives certainty binding on you and the jurisdictional officer, though only for your own transactions.

Rate changes and the time of supply

Section 14 handles supplies spanning a rate change. The applicable rate depends on which two of the three events — supply, invoice, payment — occurred before the change. Where two of the three happened before, the old rate applies; where two happened after, the new one does.

This matters at every rate revision, and businesses with long delivery cycles need the dates recorded rather than reconstructed.

Frequently asked questions

### How many GST rate slabs are there in India?

Five principal slabs — nil, five, twelve, eighteen and twenty-eight per cent — plus a three per cent rate on precious metals and a quarter per cent on rough diamonds. Compensation cess applies on top of the twenty-eight per cent rate for specified luxury and demerit goods.

### What rate applies to a bundled supply?

It depends on whether the bundle is natural. A composite supply, naturally bundled with an identifiable principal supply, takes the principal supply's rate. A mixed supply, not naturally bundled and sold for a single price, takes the highest rate among its components.

### What is the default GST rate for services?

Eighteen per cent, which is the residual rate for services not specifically notified at another rate. A great many services attract it, which is why the eighteen per cent figure is so often quoted as though it were the only service rate.

### Who decides GST rates?

The GST Council, a constitutional body under Article 279A comprising the Union Finance Minister and the finance ministers of the States. Its recommendations are given effect through notifications issued by the central and State governments.