Structure of GST in India: Two-Tier GST Tax Structure Breakdown

To address inflation concerns and ensure essential items like basic food remain tax-exempt, the GST Council implemented a four-tier GST tax structure. In this article, we'll learn about this structure, understand its importance, and explore different tax slabs under the GST structure in India. 

What is the structure of GST in india? 

The most awaited 56th GST Council meeting happened 3rd September 2025 in New Delhi. The council has rationalised the GST rate structure from four GST slabs (5%, 12%, 18%, 28%) to a simplified two-tier structure:

• Standard rate: 18% - Applicable to most goods and services
• Merit rate: 5% - For essential items and priority sectors

Further, a demerit rate of 40% GST will be applied selectively to sin goods and super-luxury items.

Key Takeaways

1. New GST rate changes will be effective from 22nd September 2025 except tobacco products.

2. GST on individual health & life insurance has been made exempted.

3. GST on dairy products, 33 lifesaving drugs and educational essentials have been brought down to Nil rate.

4. GST on daily essentials, agriculture goods, health care equipment have been brought down to 5%.

5. GST on electronic appliances, small cars and motor cycles (≤350cc) have been brought down to 18%.

6. GST on sin goods such as pan masala, aerated waters, caffeinated beverages, carbonated beverages of fruit drinks / with fruit juice has been increased to 40%.

Importance of understanding GST structure

Understanding the GST structure in India is ke­y to follow the rules, lesse­n tax burdens, and run your business honestly and re­sponsibly. This knowledge lets you make smart choices, dodge possible fine­s, and guard your financial health.

Structure of GST

There are different taxes levied under the structure of GST in India. To help you understand what these mean, we will explain each one of them here:

GST Rate Changes from 56th GST Council Meeting

The next gen GST reforms represent the most comprehensive GST rate overhaul since the introduction of GST. This rate revision directly impacts financial strategies, cash flows, and competitive positioning.

GST rate cuts-

GST rate hikes-

* To come into effect at a later date (not from 22nd Sept, 2025) through a notification, after the loan and interest obligations under the compensation cess are discharged.

1. Introduction to zero rate in GST

Zero rate in GST means a nil tax rate levied on the goods and services. In other words, a zero rate is equivalent to tax exemption. The government decides the goods and services that are eligible for a zero-tax rate. Some examples include fresh fruits, bread, milk, curd. Also supplies made to SEZ developers or Special economic zones and overseas come under zero-rate tax.

2. Lower rate (5%)

A lower rate means 5% GST is applied to commodities and services. Some examples include footwear under Rs. 500, clothing under Rs. 1000, packaged food items, branded paneer, cream, skimmed milk powder, etc. 

3. Standard rate (12-18%)

The standard rate comes into play when a 12-18% GST is applied. The standard rate of 12% includes butter, cheese, frozen meat products, ghee, animal fat, sausages, packaged dry fruits, namkeen, fruit juices, ketchup & sauces, etc. 18% GST is applied for pastries, pasta, cakes, hairdryers, panels, vacuum cleaners, wires, telecom services, IT services, etc. 

4. When will a higher rate (18% and 28%) of GST apply

A higher rate is applied when luxury items are considered. For items such as paint, washing machines, cement, automobiles, shampoo, aerated water, sunscreen, motorcycles, etc., a 28% GST is applied. Some items are under the 28% slab for which the government fixes an additional cess.