Complete Guide to Indian GST Slabs (5%, 12%, 18%, 28%): HSN Rules & Exemptions for MSMEs
Since its introduction in July 2017, the Goods and Services Tax (GST) has harmonized indirect taxation across India under the principle of "One Nation, One Tax". For freelancers, sole proprietorships, and micro-enterprises (MSMEs), understanding your correct tax slab is essential to prevent penalties and ensure smooth Input Tax Credit (ITC) reconciliation.
The Four Core GST Tax Slabs in India
| GST Slab | Typical Goods Covered | Typical Services Covered |
|---|---|---|
| 0% (Exempt) | Fresh vegetables, milk, unbranded grains, salt, hearing aids, organic manure. | Public health care, basic school education, non-AC railway travel. |
| 5% | Apparel below ₹1000, edible oils, life-saving medicines, tea, spices, cashew nuts. | Economy class air travel, railways AC travel, small restaurants. |
| 12% | Processed foods, frozen meat, pharmaceutical products, notebooks, wooden furniture. | Business class air travel, hotels with room tariffs between ₹1000 and ₹7500. |
| 18% (Standard) | Footwear above ₹1000, electronic items, machinery, optical fibers, biscuits, soap. | IT & software development, consulting, legal (B2B), telecom services, financial intermediation. |
| 28% (Luxury / Sin) | Automobiles, motorcycles, tobacco products, carbonated sugary beverages, air conditioners. | 5-star luxury hotels, race club betting, casinos, luxury entertainment centers. |
Intra-State vs Inter-State GST Rules
When selling within the same state (Intra-State), the applicable rate is divided equally between Central GST (CGST) and State GST (SGST). For example, an 18% IT service fee involves 9% CGST and 9% SGST. For inter-state sales, the unified 18% is billed as Integrated GST (IGST).
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