40% GST slab

40% GST slab 

40% GST Slab: Full List of Goods & Services Under New Rate Effective September 22, 2025

Author: AirFinac

The 56th GST Council meeting has introduced a major restructuring of GST slabs. India’s indirect tax system has now been rationalised into:

• 5% (merit rate) – covering essential goods and services
• 18% (standard rate) – applicable to most goods and services
• 40% (de-merit rate) – applicable to sin goods, super luxury items, and select services

This new 40% GST slab marks the biggest indirect tax reform since GST’s launch in 2017. The revised rates will apply from September 22, 2025, except for certain tobacco-related products, which will continue under the old structure until further notice.

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Tobacco & Cigarettes: Special Implementation Rule

For items such as cigarettes, chewing tobacco (zarda), unmanufactured tobacco, and beedis, the existing GST plus compensation cess will remain in force. The shift to the 40% GST rate will only take place after the government fully settles loans and interest liabilities linked to the compensation cess.

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Goods Shifted to the 40% GST Slab

Below is the complete list of products now taxed at 40% GST, along with their previous rate:

S. No.	HSN / Tariff Code	Description	Earlier GST	New GST
1	2106 90 20	Pan Masala*	28%	40%*
2	2202 10	Aerated & sweetened beverages	28%	40%
3	2202 99 90	Caffeinated drinks	28%	40%
4	2202	Carbonated fruit drinks & fruit-juice-based beverages	28%	40%
5	2202 91 00 / 2202 99	Other non-alcoholic drinks	18%	40%
6	2401*	Unmanufactured tobacco, tobacco refuse (except leaves)*	28%	40%
7	2402*	Cigars, cheroots, cigarettes, cigarillos*	28%	40%
8	2403*	Other manufactured tobacco substitutes, reconstituted tobacco, extracts/essences*	28%	40%
9	2404 11 00*	Tobacco products for inhalation (non-combustion)*	28%	40%
10	2404 19 00*	Nicotine substitute products for inhalation*	28%	40%
11	8703	Luxury cars, racing cars & station wagons (excl. small cars)	28%	40%
12	8703 40, 8703 60	Petrol/CNG hybrid cars >1200cc or >4000mm	28%	40%
13	8703 50, 8703 70	Diesel hybrids >1500cc or >4000mm	28%	40%
14	8711	Motorcycles above 350cc	28%	40%
15	8802	Aircraft for personal use	28%	40%
16	8903	Yachts & luxury vessels	28%	40%
17	9302	Revolvers & pistols (excl. 9303/9304)	28%	40%
18	9614	Smoking pipes & holders	28%	40%

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Key Changes for the Automobile Sector

• Small Cars Cheaper: GST reduced from 28% to 18%
• Petrol/LPG/CNG cars with ≤1200 cc & length ≤4000 mm
• Diesel cars with ≤1500 cc & length ≤4000 mm
• Mid-Size & Large Cars: GST increased to 40% (no cess)
• Engine capacity >1500 cc or length >4000 mm
• Utility vehicles (SUVs, MUVs, MPVs, XUVs) with engine >1500 cc, length >4000 mm, and ground clearance ≥170 mm

Earlier, large cars attracted 28% GST + 17–22% compensation cess (effective tax 45–50%). Now, the structure is simplified to a flat 40% GST.

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Services Shifted to the 40% GST Slab

S. No.	Service Code	Description	Earlier GST	New GST
1	9973	Leasing/rental of goods (without operator, with ITC)	28%	40%
2	—	Admission to casinos, race clubs, IPL & sporting events	28%	40%
3	—	Licensing of bookmakers by race clubs	28%	40%
4	—	Specified actionable claims (betting, gambling, lottery, horse racing, online real-money gaming)	28%	40%

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Final Takeaway

The introduction of the 40% GST slab clearly aims to tax luxury consumption, sin goods, and high-end services more heavily, while giving relief to middle-class car buyers through reduced GST on small cars.

Consumers of pan masala, tobacco products, luxury cars, yachts, aircraft, and casino services will face a steep rise in tax rates, whereas compact car buyers can expect lower prices.

Frequently Asked Questions (FAQs) on 40% GST Slab

1. Which goods fall under the 40% GST rate?
The 40% GST rate applies to luxury and sin goods such as pan masala, aerated drinks, caffeinated beverages, tobacco products, large and mid-size cars, motorcycles above 350cc, yachts, aircraft for personal use, and revolvers/pistols.

2. What services are taxed at 40% GST from September 22, 2025?
Services like admission to casinos, race clubs, IPL and sporting events, betting, gambling, lottery, horse racing, online real-money gaming, and leasing of goods (without operator) will now attract 40% GST.

3. What is the new GST rate on small cars in India?
The GST on small cars has been reduced to 18%. This includes petrol, LPG, and CNG cars with engine capacity up to 1200 cc and length up to 4000 mm, and diesel cars with engine capacity up to 1500 cc and length up to 4000 mm.

4. Has GST on large and luxury cars increased?
Yes. Cars with engine capacity above 1500 cc or length exceeding 4000 mm, as well as SUVs, MUVs, and MPVs with ground clearance above 170 mm, will now attract a flat 40% GST without compensation cess.

5. What happens to tobacco and cigarette GST rates?
For now, cigarettes, zarda (chewing tobacco), unmanufactured tobacco, and beedis will continue under the existing GST + compensation cess structure. The 40% GST rate for these items will be implemented later, once cess-related government liabilities are cleared.

6. Why did the GST Council introduce a 40% slab?
The GST Council created the 40% slab to discourage consumption of harmful products (like tobacco, pan masala, sugary drinks) and to impose higher taxes on luxury goods/services, while simplifying the overall GST structure.

DISCLAIMER-Airfinac.com, its author/writer and associates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.