Stage 1 · GST basics
GST-2: Rates and What Is Taxed
Nil, 5%, 18% or 40%? Put the school’s uniforms, blazers and notebooks on the right step, and find out why “no GST” can cost a doctor money.
What you will learn in GST-2
- The four GST rates and what sits on each
- The ₹2,500 line for garments
- Nil-rated, exempt and zero-rated supplies (s. 2(47))
- Why exempt sellers lose input tax credit
Chapters
- Four steps on the ladder · Nil, 5%, 18% and 40%, and what usually sits on each step (s. 9)
- The ₹2,500 line for clothes · The same school, two garments, two rates (s. 9)
- Taxed, nil or exempt? · Why “no GST” is not always good news for the seller (s. 2(47))
- Check the price list · Put the rates on a real list, then a lightning round (ss. 9, 2(47))
Key terms
- HSN and SAC codes (s. 9): Every kind of goods has an HSN code and every service a SAC code. The rate list is arranged by these codes, so the code tells you the rate.
- Exempt supply (s. 2(47)): A supply on which no GST is charged: nil-rated items, items exempted by notification, and things outside the GST law such as petrol and alcohol for drinking.
Common questions
What are the GST rates now?
Since 22 September 2025 the main rates are 5% and 18%, with nil for essentials and 40% on a short list of luxury and harmful goods. Always check the current rate notification for a particular item.
What is the GST rate on clothes?
5% when the sale value of a piece is up to ₹2,500, and 18% above that.
What is the difference between nil-rated and exempt?
Both carry no GST and both stop the seller claiming credit on inputs. Nil-rated items are listed at 0%; exempt items are freed by a separate notification. Exports are zero-rated, which keeps the credit.
CGST Act, 2017, s. 9 and s. 2(47); rates from 22 September 2025. Checked against the GST law in force on 8 November 2026. Selvi Garments, the school order and every figure in this lesson are fictional. Read the official text on the CBIC GST Acts and Rules page ↗ before applying it to real work.