Last updated: July 2026. Fully rewritten for the two-rate GST structure that took effect on 22 September 2025 – the old 5%/12%/18%/28% slabs no longer apply.
GST Rates for Services in India – The Two-Rate Structure
Under GST, services are classified using SAC (Services Accounting Code). From 22 September 2025, following the 56th GST Council meeting (3 September 2025), services are taxed under a simplified two-rate structure of 5% and 18%, with a 40% demerit rate for a small list of specified services. The earlier 12% and 28% slabs were abolished. The changes were notified via Notification No. 15/2025-Central Tax (Rate) (rates) and Notification No. 16/2025-Central Tax (Rate) (exemptions), both dated 17 September 2025 – see the official 56th GST Council press release and the CBIC tax information portal for the notification texts.
Services Exempt from GST (0%)
- Individual health and life insurance policies (including ULIPs, family floaters, and senior citizen plans) – newly exempted from 22 September 2025; earlier taxed at 18%
- Healthcare services by clinical establishments and authorized medical practitioners
- Educational services by schools, colleges, and recognized institutions
- Services by the Reserve Bank of India
- Agricultural services like harvesting, cultivation, and supply of farm labor
- Public transport services (non-AC buses, metro, local train)
- Funeral, burial, and crematorium services
Services at 5% GST
| Service | SAC Code | GST Rate |
|---|---|---|
| Hotel accommodation up to ₹7,500/day (without ITC) | 9963 | 5% |
| Beauty and physical well-being: salons, barbers, gyms, yoga (without ITC) | 9972/9997 | 5% |
| Standalone restaurants (without ITC) | 9963 | 5% |
| Transport of goods by road (GTA, without ITC option) | 9965/9967 | 5% |
| Transport of passengers by air (economy class) | 9964 | 5% |
| Multimodal transport of goods (no air leg) | 9965 | 5% |
| Tour operator services (without ITC) | 9985 | 5% |
| Job work for pharmaceuticals, hides and leather, food products; tailoring | 9988 | 5% |
Services at 18% GST
The 18% standard rate now covers everything that is not in the 5% merit list, the exempt list, or the 40% demerit list – including all services that were previously at 12% or 28%:
- IT and software services (SAC 9983) – Development, maintenance, consulting
- Professional and consulting services (SAC 9982/9983) – Legal, accounting, CA, engineering
- Telecommunication services (SAC 9984)
- Financial services (SAC 9971) – Banking, brokerage, fund management (individual life and health insurance are exempt)
- Hotel accommodation above ₹7,500/day (SAC 9963) – with full ITC
- Restaurants in hotels with tariff above ₹7,500/day – with ITC
- Transport of passengers by air, other than economy (SAC 9964) – business/premium class, up from 12%
- Residual job work / manufacturing services (SAC 9988) – up from 12%
- Courier services and local delivery, including through e-commerce operators (SAC 9968)
- Renting of commercial property (SAC 9972)
- Advertising, event management, repair and maintenance
Services at 40% GST (Demerit Rate)
A new top rate applies to a narrow list of specified services:
- Betting, gambling, casinos, horse racing, and lottery
- Online money gaming
- Admission to casinos, race clubs, and sporting events like the IPL
What Changed on 22 September 2025 – Quick Reference
| Service | Old Rate | New Rate |
|---|---|---|
| Individual health and life insurance | 18% | Exempt |
| Hotel rooms up to ₹7,500/day | 12% | 5% (no ITC) |
| Gyms, salons, barbers, yoga | 18% | 5% (no ITC) |
| Air travel (other than economy) | 12% | 18% |
| Residual job work | 12% | 18% |
| Betting, casinos, online money gaming | 28% (plus cess) | 40% |
How to Determine the Correct GST Rate
- Identify the nature of the service provided
- Find the applicable SAC code and its entry in Notification No. 15/2025-Central Tax (Rate), as amended
- Check the exemption list in Notification No. 16/2025-Central Tax (Rate)
- Check ITC conditions – several 5% entries (hotels, restaurants, GTA, beauty services) are without ITC
- Apply the correct rate on your invoice
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This article is for general information based on tax law current at the time of review and is not a substitute for professional advice. Verify figures against the official Income Tax and GST portals, and consult a qualified professional for your specific situation.