On 22 September 2025 the GST rate structure collapsed from five slabs to four. A year on, most SMEs have updated the rate in their billing software and consider the job done. The rate was the easy part.
The structure now runs 0%, 5%, 18% and 40%. The 12% and 28% slabs were retired, with most items consolidated into 5% and 18%, and a narrow 40% band created for sin and luxury goods — tobacco, pan masala, carbonated and caffeinated drinks, high-performance vehicles above 350cc, pleasure craft.
Services barely moved. Goods did.
If you supply services, your headline rate is almost certainly still 18% and nothing dramatic happened to you. If you supply goods, your classification work was real: items that sat at 12% or 28% had to move, and moving them meant revisiting HSN codes per SKU rather than applying a blanket change.
The businesses that got caught are the ones that did a find-and-replace on rates without re-checking classification. A product that moved from 28% to 18% is straightforward. A product that moved from 12% to 5% for some variants and 18% for others is where the errors sit.
What most people did not update
Three things routinely get missed.
Contracts written before the change
Any agreement quoting a specific GST rate in the consideration clause — rather than saying "plus GST as applicable" — is now potentially inconsistent with what you are actually required to charge. Long-term supply agreements and AMCs are the usual culprits.
Reverse charge on imported services
Adobe, Canva, Notion, Frame.io, stock music libraries, foreign contractors, and Meta or Google ad spend billed from abroad all attract 18% IGST under reverse charge, payable in cash, with self-invoicing under Section 31(3)(f). If you are registered you take the credit back, so the net cost is frequently nil. The penalty for never having declared it is not nil.
This one predates GST 2.0 but the rate reshuffle was the moment many businesses reviewed their tax positions, and it is the item that most often surfaces.
The sponsorship change
Separately, from 16 January 2025, sponsorship services supplied by a body corporate moved from reverse charge to forward charge. Advisers still applying RCM there are creating mismatches that show up in reconciliation.
The rate was the easy part. Classification, contracts and reverse charge are where the money actually sits.
One thing that went away
The 6% equalisation levy on online advertisement was abolished with effect from 1 April 2025. If it is still sitting in your chart of accounts as a live liability, it should not be.
A short self-check
Worth confirming this quarter
- Has every SKU been re-checked against its HSN code, not just its old rate?
- Do any live contracts quote a hard-coded GST percentage?
- Is reverse charge being computed and declared on every imported service, including software subscriptions?
- If you receive sponsorship from a body corporate, are you charging the GST rather than expecting them to?
- Does your invoice template still carry any reference to a 12% or 28% slab?
Why this matters more than it looks
GST errors compound quietly. A misclassified SKU does not announce itself — it sits in your returns, correct-looking, until a reconciliation or a notice surfaces it along with interest for every month since. The cost of a classification review now is a fraction of the cost of defending a position later.
If you would like a second pair of eyes on your rate master and reverse charge position, that is a contained piece of work and we are happy to scope it.
This article is general guidance as at 8 September 2026 and is not advice on any specific situation. References reflect the Income-tax Act, 2025 (in force from 1 April 2026), the CGST and IGST Acts as amended, and GST rates effective 22 September 2025. Please obtain advice on your own facts before acting.