Over coffee my colleague asked, “So which of our products will jump to 40% under GST 2.0?” I smiled and said, “Let me walk you through the new rate table — and show you a few quick checks you can run this afternoon.” This guide does exactly that: a plain-language, practical walkthrough of the slab reform, an updatable rate-table template (example rows), worked SKU examples, and a short pricing & working-capital playbook for finance teams.
Quick snapshot — what this article gives you
One page you can keep returning to: a clear explanation of why slabs change, an easy-to-scan rate table you can update, three worked examples showing how prices and margins move, and a short checklist finance teams can run in the next 7–30 days.
Why the government simplifies GST slabs — told like a story
Imagine a supermarket aisle where every product has a different sticker. That’s messy for shoppers and painful for suppliers. Simplifying slabs reduces disputes, speeds up compliance, and makes invoicing easier — but it also forces businesses to rethink pricing. That trade-off is at the heart of the slab reform people call “GST 2.0.”
The new rate table — example & template (update as official rates land)
Below is a simple, updatable table you can paste into your CMS and refresh when the GST Council publishes the final list. I’ve populated the table with illustrative example rows so you see how to use it; treat the numbers here as examples only and verify with the official notification before making pricing decisions.
| HSN / Category (example) | Representative product | Current rate (example) | Proposed GST 2.0 band (example) | Change | Quick note |
|---|---|---|---|---|---|
| 01–24 (food basics) | Staple food / basic hygiene | 12% (sample) | 5% | ↓7 pp | Essential items; lower consumer price impact |
| 62–63 / services | Clothing / services | 18% | 18% | — | Majority of goods & services remain mid-band |
| 24 / tobacco / sin | Tobacco & selected luxury items | 18% + cess | 40% (luxury/sin band example) | ↑(significant) | Policy intended as deterrent & revenue |
Note: The table above is a template with illustrative examples. Replace the example rows with the official HSN-to-rate mapping published by the GST Council. Date-stamp the table when you update it.
How to read the slab logic — in plain language
Why 5%? (Essentials)
Think essentials and staples: items that keep households running. If a product moves to 5%, expect lower consumer prices but also pressure on manufacturer margins if costs are unchanged. First step: identify staples in your top 50 SKUs.
Why 18% stays the “workhorse”
Most goods and many services sit in a mid-band around 18%. That keeps administration straightforward for everyday business items. If your SKU stays here, your main task is to check packaging/HSN codes and update price labels where necessary.
Why a 40% band for luxury & sin goods?
Governments often create a high band to both raise revenue and discourage consumption of certain items (luxury items, sin goods). If a product moves into this band, expect demand sensitivity — customers may push back on price increases.
Transitional rules & exceptions
Expect phased application, temporary blends for mixed supplies, and carve-outs for specific categories. That’s why you should never reprice blindly on day one — wait for the official notification and the transition guidance.
Worked examples — simple price & margin calculations
Below are three short examples using round numbers so you can copy the method. These show how a slab change affects the consumer price and a seller’s margin when you either pass the tax to customers or absorb part of it.
Example 1 — Soap (staple hygiene)
Assumptions (illustrative): Cost to seller = ₹40, desired margin = 25% → pre-tax price = ₹40 + ₹10 = ₹50
Current GST 12%: Consumer price = ₹50 + (12% of ₹50) = ₹56.00
New GST 5%: Consumer price = ₹50 + (5% of ₹50) = ₹52.50 → Consumer saves ₹3.50. Seller margin unchanged in absolute terms unless seller reduces price.
Example 2 — LED TV (mid-range, stays in 18%)
Assumptions: Cost = ₹25,000, margin 10% → pre-tax price = ₹27,500
At 18% GST: Consumer price = ₹27,500 + 18% = ₹32,450
If SKU remained at 18% there is no direct tax shock; work is to ensure correct HSN mapping and MRP labelling.
Example 3 — Premium watch (possible luxury band)
Assumptions: Cost = ₹15,000, margin 20% → pre-tax = ₹18,000
If current GST = 18% → consumer price = ₹21,240
If moved to 40% → consumer price = ₹25,200 (increase ₹3,960). Seller must decide to absorb part of the increase, raise price fully, or use marketing/promotions to soften demand shock.
Formula (simple): Consumer price = Pre-tax price × (1 + GST%). Pre-tax price = Cost + Desired margin.
Working-capital & pricing playbook (short checklist)
When slabs change, the two immediate finance concerns are: (1) margin & pricing decisions, and (2) temporary working-capital shifts due to customer reactions or delayed refunds. Here’s a short playbook:
- Run a top-50 SKU impact report (price, margin, unit volumes) — pick the top 10 by value to prioritise.
- Decide your pass-through policy: full pass, partial absorption, or short-term promotion.
- Update price labels, product pages and invoice templates once official rates are out.
- Inform procurement—negotiate supplier contracts if input tax treatment changes.
Sector notes — a quick friend-to-friend heads-up
Retail & FMCG: Fast-moving items need urgent SKU mapping and price labels. Auto & durable goods: margin sensitivity and EMI/finance considerations matter. Luxury & sin goods: expect demand elasticity — plan marketing and bundling strategies carefully.
How to keep the rate table accurate (process for finance teams)
- Assign a single owner (finance) to update the rate table and date-stamp each change.
- Subscribe to official GST Council notifications and your trade-body alerts.
- Keep a changelog (what changed, why, and who approved the pricing decision).
- Share a short internal memo with sales & procurement after each update.
FAQs (short answers)
Q — Which items will move to 5%?
A — Essentials and certain staples are likely candidates, but confirm with the official HSN-to-rate notification from the GST Council before acting.
Q — Will all sin goods be taxed at 40%?
A — Not necessarily. A 40% band is intended for certain luxury or sin items, but the exact list will be published officially. Treat any 40% mention as policy direction until notified.
Q — How soon should I change prices once rates are announced?
A — Wait for the official notification and any transition rules. Prepare models and communications in advance, but implement changes after legal clarity.
Q — Where can I find the official rate notification?
A — The GST Council / CBIC official site will publish the notification. Also watch trusted trade press and professional advisory updates.
Conclusion — a calm plan for a messy change
Slab reform is a big event, but it’s a process you can manage. Keep your rate table updated, run quick SKU impact checks, prioritise vendor & HSN mapping, and make pricing decisions consciously — not in panic. If you want a short, customised SKU impact review or a dated PDF of the rate table template we can help — contact Infinity Finance for a quick call.
Disclaimer: This article uses illustrative examples to explain mechanics. Use official GST Council notifications for legal decisions and final rate mappings.