The new 40% GST slab replaced the old 28% rate for luxury and sin goods after GST 2.0. Here is the complete item-wise list with HSN codes, effective September 22, 2025.
The 40% GST rate is the most talked-about change in GST 2.0, which came into effect on September 22, 2025. Before the reform, the highest GST slab was 28% — applied to luxury goods and sin goods with an additional cess on top for some categories. Under GST 2.0, the 28% slab was abolished and replaced with a cleaner 40% rate for the same categories.
This means tobacco products, aerated drinks, luxury cars, and other sin/luxury goods now attract a base rate of 40% GST — up from 28%. The government's stated rationale is twofold: public health (discouraging consumption of harmful goods) and revenue neutrality (offsetting the revenue loss from abolishing the 12% slab and exempting insurance).
For businesses selling items in this category, the change is significant. A cigarette manufacturer whose products previously attracted 28% base GST now charges 40%. A luxury car dealer selling a Rs 20 lakh SUV now adds Rs 8,00,000 in GST instead of Rs 5,60,000. We will walk you through every item category, its HSN code, and what changed. Use our free GST calculator to verify the exact tax amount on any invoice.
All tobacco and tobacco-related products fall under HSN Chapter 24 and now attract 40% GST. This was one of the most anticipated changes in GST 2.0 — the old 28% rate plus cess structure was confusing, and the new flat 40% rate simplifies compliance for manufacturers and distributors.
Cigarettes (HSN 2402): All cigarette types — filtered, unfiltered, with or without tobacco substitutes — attract 40% GST. HSN 2402 10 00 covers cigars, HSN 2402 20 covers cigarettes containing tobacco. A pack of cigarettes that previously had 28% GST + cess now shows 40% GST on the invoice (cess continues separately under the Compensation Cess framework).
Bidis (HSN 2402 10): Handmade and machine-made bidis are at 40% GST. HSN 2402 10 10 covers handmade bidis and HSN 2402 10 20 covers machine-made bidis. Note that bidis had been at 28% — the increase to 40% reflects the health policy priority.
Chewing tobacco (HSN 2403): Chewing tobacco, snuff, and other manufactured tobacco products under HSN 2403 are at 40%. This includes HSN 2403 11 00 (water pipe tobacco), HSN 2403 19 (other smoking tobacco), HSN 2403 91 (homogenised or reconstituted tobacco), and HSN 2403 99 (other manufactured tobacco).
Pan masala and gutka (HSN 2106): Pan masala containing tobacco (gutka) is classified under HSN 2106 90 20 and attracts 40% GST. Plain pan masala without tobacco (HSN 2106 90 30) also moved from 12% to 40% under GST 2.0 — a major increase that was specifically called out in the GST Council resolution.
For businesses in the tobacco trade — distributors, wholesalers, and retailers — update your billing software to reflect 40% on all these HSN codes. In our HSN code finder, search for Chapter 24 to see all codes with their updated rates.
Carbonated beverages and energy drinks moved from the old 28% + cess structure to a flat 40% GST under GST 2.0. The primary HSN code for aerated waters and soft drinks is HSN 2202. Here is the breakdown by sub-category:
Carbonated soft drinks (HSN 2202 10 00): This covers Coca-Cola, Pepsi, Sprite, Limca, Thums Up, Mountain Dew, and all other carbonated beverages containing added sugar or sweeteners. All these products are now at 40% GST. A 2-litre bottle with an MRP of Rs 100 now has Rs 28.57 embedded GST (at 40% on the base price) versus Rs 21.87 at the old 28%.
Energy drinks (HSN 2202 99): Red Bull, Monster, Sting, and other energy drinks fall under HSN 2202 99 90 and attract 40% GST. These were previously at 28% + cess.
Packaged coconut water with added sugar (HSN 2202): Plain packaged coconut water is at 12%, but variants with added sugar or flavouring fall under HSN 2202 and are now at 18% (not 40%). Only drinks that were previously in the aerated/sweetened category with cess are at 40%.
Sweetened fruit drinks with carbonation (HSN 2202): Products like Frooti, Maaza, or Slice are NOT at 40% — they are at 18% as non-carbonated beverages. 40% applies specifically to carbonated (aerated) drinks with added sugar under HSN 2202 10.
For distributors and retailers of FMCG beverages, the key distinction is carbonation. Non-carbonated fruit drinks are at 18%; carbonated sodas are at 40%. Use our HSN code tool to confirm the exact classification for any beverage product.
Luxury vehicles fall under HSN Chapter 87 and were reclassified under GST 2.0. The key threshold for the 40% rate is vehicles above Rs 15 lakh ex-showroom price. Here is the detailed breakdown:
Luxury cars above Rs 15 lakh (HSN 8703): Sedans, SUVs, and hatchbacks with ex-showroom price exceeding Rs 15 lakh attract 40% GST. This covers vehicles like Toyota Fortuner, Honda City top variants, Hyundai Tucson, BMW 3 Series, Mercedes C-Class, Audi A4, and all premium segment vehicles. HSN 8703 22, 8703 23, 8703 24, and 8703 32 through 8703 34 cover different engine displacement categories — all at 40% for vehicles above the price threshold.
High-end SUVs (HSN 8704): Commercial-bodied SUVs and multi-utility vehicles above Rs 15 lakh also fall in the 40% bracket. HSN 8704 21 and 8704 31 cover these categories.
Sports bikes above 350cc (HSN 8711): Motorcycles with engine displacement above 350cc — including Royal Enfield 650 range, KTM Duke 390, BMW G 310, Kawasaki Ninja, Harley-Davidson models — are at 40% GST under HSN 8711 40 00 (350cc-500cc) and HSN 8711 50 00 (above 500cc).
Private aircraft (HSN 8802): Small private aircraft and helicopters for personal use fall under HSN 8802 and attract 40% GST. Commercial aircraft remain at 5%.
Yachts and recreational boats (HSN 8903): Yachts, pleasure boats, rowing boats, and canoes used for personal recreation fall under HSN 8903 and are at 40% GST. Fishing boats and commercial vessels are at 5% and are unaffected.
For automobile dealers and vehicle finance companies, update your invoice templates to reflect 40% on qualifying vehicles. A Rs 30 lakh car now has Rs 12,00,000 in GST versus Rs 8,40,000 at the old 28% rate — a significant difference that customers will notice.
Complete list of additional luxury goods moved to or confirmed at 40% under GST 2.0
We see a lot of confusion about how much more expensive goods actually get under 40% GST versus 28%. Here are concrete calculations for the most common categories:
Cigarettes (per pack of 20, Rs 200 MRP):
Old rate: 28% base GST = Rs 43.75 GST on base price of Rs 156.25. New rate: 40% base GST = Rs 57.14 GST on base price of Rs 142.86. The MRP stays the same but the manufacturer's taxable value drops — meaning manufacturers absorb most of the increase or raise MRP at the next revision.
Luxury car (Rs 25 lakh ex-showroom):
Old rate (28%): GST = Rs 7,00,000. Total on-road price starts at Rs 32,00,000.
New rate (40%): GST = Rs 10,00,000. Total on-road price starts at Rs 35,00,000.
The buyer pays Rs 3,00,000 more in GST on a single vehicle purchase.
Energy drink (500ml can, Rs 120 MRP):
Old rate (28%): Embedded GST ≈ Rs 26.25.
New rate (40%): Embedded GST ≈ Rs 34.29.
Per can, the increase is about Rs 8 — which is why beverage companies increased MRPs post-GST 2.0.
Aerated soft drink (2L bottle, Rs 90 MRP):
Old rate (28%): Embedded GST ≈ Rs 19.69.
New rate (40%): Embedded GST ≈ Rs 25.71.
MRP increased by Rs 5-6 at most outlets after September 2025.
Use our GST calculator to run these calculations for any amount. Enter the base price, select 40% rate, and it shows the GST amount and total price instantly.
If your business deals in goods attracting 40% GST, here is what you need to ensure on your invoices:
Show the rate clearly: Your GST invoice must show 40% as the applicable rate. For intra-state sales, show CGST 20% + SGST 20%. For inter-state sales, show IGST 40%. The old 28% breakdowns (CGST 14% + SGST 14%) are no longer valid for invoices from September 22, 2025.
E-invoice threshold lowered: Under GST 2.0, the e-invoice threshold was reduced to Rs 5 crore turnover. If your business crosses Rs 5 crore annual turnover and you sell 40% GST goods, you must generate e-invoices through the IRP portal for every B2B transaction. Failure to generate e-invoices attracts a penalty of Rs 10,000 per invoice.
Cess on tobacco: For tobacco products, the Compensation Cess continues to apply on top of the 40% base GST. The cess rates are notified separately — consult the latest CBIC notification for the specific cess amount for each tobacco HSN code.
In myBillPlease, update your product GST rates to 40% for any items in the luxury slab. The invoice template automatically calculates the correct CGST/SGST or IGST split based on your buyer's state. For e-invoice customers, myBillPlease integrates directly with the IRP portal — invoices are automatically registered when you save them.
myBillPlease supports all GST rates including the new 40% luxury slab. Generate compliant invoices with correct CGST/SGST split and e-invoice integration.
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