GST: the two-rate structure
The 56th GST Council approved a new rate structure on 3 September 2025, effective from 22 September 2025:
| Rate | Applies to |
|---|---|
| 5% | Merit goods and services |
| 18% | Standard rate |
| 40% | A select few goods and services |
Tobacco initially stayed on its earlier rates and compensation cess.
Examples of rate changes
| Goods | Before | From 22 Sep 2025 |
|---|---|---|
| Air conditioners, dishwashers, televisions above 32 inches | 28% | 18% |
| Footwear and apparel priced up to ₹2,500 | — | 5% |
| Apparel above ₹2,500 a piece | 12% | 18% |
| Hair oil, soap, shampoo, toothpaste, most packaged foods | — | 5% |
| Most medicines and many medical devices | — | 5% |
| Renewable energy devices and parts for their manufacture | 12% | 5% |
| Individual health insurance | — | Exempt |
Small cars and their parts also moved to 18%. Sector guides give fuller lists for retail and consumer goods and automotive.
Registration
Since 1 November 2025, low-risk applicants can opt for automated GST registration within three working days. This covers applicants whose tax on supplies to registered persons is within ₹2.5 lakh a month, and other low-risk applicants. Others follow the standard process. GST registration can also be requested at incorporation through the AGILE form linked to SPICe+.
Services exports and intermediaries
The Finance Act 2026 (s.157) removed the special place-of-supply rule for intermediary services from the IGST Act. Intermediary services now follow the general place-of-supply rule and can qualify as exports. This matters for captive centres and support entities that provide services to group companies abroad.
In GIFT City IFSC, no GST applies to services to or from IFSC units or to offshore clients, and there is no STT, CTT, stamp duty or GST on transactions on IFSC exchanges.
Customs: measures from Budget 2026-27
- Authorised Economic Operators get duty deferral of 30 days.
- Advance rulings are valid for five years.
- Exemptions withdrawn on items now made in India, with new basic customs duty exemptions for capital goods used to process critical minerals and for specified microwave-oven parts.
- From 2 February 2026: the exemption on capital goods for making lithium-ion cells extends to cells for battery energy storage systems; duty on sodium antimonate for solar glass falls from 7.5% to nil; and goods for nuclear power projects of any capacity registered with customs by 30 September 2035 carry nil basic customs duty.
- Lithium-ion cells: exemptions for cells for EV and hybrid battery packs, and for cell-making inputs, run to 31 March 2028.
- Personal imports: the tariff rate on dutiable goods imported for personal use (heading 9804) fell from 20% to 10% from 1 April 2026.
Bonded manufacturing (MOOWR)
Manufacturing and other operations in a customs-bonded warehouse need a warehouse licence (s.58) and permission under s.65 of the Customs Act 1962. MOOWR is a deferment, not an exemption: duty and GST become payable when goods are cleared to the domestic market, and duty on imported inputs is remitted on export. Warehousing is moving to self-declaration and electronic tracking.
Linked income-tax relief applies to electronics: foreign suppliers of tooling and stocked components to electronics contract manufacturers in the warehouse are exempt, subject to conditions, to tax year 2040-41 and to 31 March 2041 respectively.
Export schemes and zones
| Scheme | What it offers | Status as of 1 Oct 2026 |
|---|---|---|
| RoDTEP | Export scheme under the Foreign Trade Policy 2023; rates and caps unchanged for 1 Apr to 30 Sep 2026 (DGFT Notification 74/2025-26) | Notified to 31 Dec 2026 (DGFT Notification 41/2026-27) |
| EPCG | Capital goods imported at zero duty against an export obligation of six times the duties saved, within six years | Open under FTP 2023 |
| STP scheme (STPI) | Customs duty exemption on imports; domestic sales up to 50% of exports | Listed by Invest India |
| SEZ | One-time facility for eligible manufacturers to sell into the domestic tariff area at concessional duty, capped at a prescribed share of exports | Announced in Budget, 1 Feb 2026; confirm notification |
| Courier exports | Removal of the ₹10 lakh per-consignment cap | Announced 1 Feb 2026 |
Electric cars
Under the scheme to promote manufacturing of electric passenger cars, an approved manufacturer can import electric cars with a CIF value of USD 35,000 or more at 15% customs duty for five years, up to 8,000 a year. It must invest at least ₹4,150 crore and start production within three years. See automotive and EV.
Check: Trade agreements change duty for qualifying goods. The India-UK CETA has been in force since 15 July 2026, and UK quota imports need a DGFT tariff-rate-quota certificate. The India-EU FTA, which would cut duty on EU cars from 110% to 10% for 250,000 vehicles a year, was announced on 27 January 2026 but is not in force. See trade agreements.
What to check next
- Confirm the GST rate for each product line under the post-September 2025 schedule, and reprice contracts signed before then.
- For a service entity billing group companies abroad, review whether its services now qualify as exports after the Finance Act 2026 change.
- Before importing plant, compare EPCG, MOOWR, STPI and SEZ routes on duty, export obligation and domestic-sale limits.
- Check that Budget 2026-27 customs changes relevant to the business have been notified, and their effective dates.
- Diary 31 December 2026 for RoDTEP and watch for a further notification.