Check the GST rate before you choose a product
The GST rate changes what you keep from every sale. Buyers see one price, but at 18% GST, Rs 180 of a Rs 1,180 sale goes to the government, against Rs 56 at 5%. Since 22 September 2025 most goods sit at 5% or 18%, so check the rate before choosing a product, not after listing it.
- From 22 September 2025, GST on most goods has two main rates: 5% and 18%. A 40% rate applies to a few selected goods.
- On a marketplace the customer price includes GST. A higher rate comes out of your share, not the buyer's.
- Clothes and footwear change rate at Rs 2,500 a piece or pair: 5% up to it, 18% above it.
- On a 5% product, the 18% GST on marketplace fees can leave you with credit you cannot use quickly.
In this guide
Why does the rate matter if the buyer pays GST?
In theory GST is the buyer's tax. In practice, on Amazon, Flipkart or Meesho, buyers compare final prices. They do not care how that price splits between you and the government. So the price is set by the market, and GST is taken out of it.
That means two products selling at the same price can leave you very different money. Here is the split on a customer price of Rs 1,180.
| GST rate | Your taxable value | GST to the government | Difference you keep |
|---|---|---|---|
| 5% | Rs 1,123.81 | Rs 56.19 | Rs 123.81 more per order |
| 18% | Rs 1,000.00 | Rs 180.00 | Base |
To get the taxable value, divide the customer price by 1 plus the rate. Rs 1,180 divided by 1.05 is Rs 1,123.81. Divided by 1.18, it is Rs 1,000.
What rates apply now?
The GST Council's 56th meeting replaced the old four-rate structure with a standard rate of 18% and a merit rate of 5%, plus a special 40% rate for a few goods. The new rates on most goods took effect on 22 September 2025. A few examples that matter to online sellers:
| Product group | GST rate from 22 Sep 2025 |
|---|---|
| Readymade clothes, sale value up to Rs 2,500 a piece | 5% |
| Readymade clothes, sale value above Rs 2,500 a piece | 18% (was 12%) |
| Footwear, sale value up to Rs 2,500 a pair | 5% |
| Footwear, sale value above Rs 2,500 a pair | 18% (no change) |
| Air conditioners and television sets | 18% (was 28%) |
| Many tableware, kitchenware and household articles | 5% (was 12% or 18%) |
These are groups, not your product. The rate follows the HSN code, the product code in the GST rate schedule, and two items that look alike can fall under different codes. Before you buy stock, find the code with our guide on how to find the HSN code for a product, and for clothes see HSN codes and GST rates for clothes.
A worked example: two products, one budget
Neha has Rs 60,000 to start a Meesho shop. She shortlists cotton kurtas and an electric gadget. Both would sell at about Rs 1,180 and cost her Rs 600 before GST from the supplier. Say the kurta is at 5% and the gadget at 18%.
| Per order | Kurta at 5% | Gadget at 18% |
|---|---|---|
| Customer price | Rs 1,180 | Rs 1,180 |
| Taxable value (your sale) | Rs 1,123.81 | Rs 1,000.00 |
| Purchase cost before GST | Rs 600 | Rs 600 |
| Margin before fees and shipping | Rs 523.81 | Rs 400.00 |
The GST she pays her suppliers comes back as input tax credit, so it does not change the margin. The rate on the sale does. On 300 orders a month, the kurta leaves her about Rs 37,143 more than the gadget before fees. Same price, same cost, same effort.
Does that mean always choose 5% products? No. Demand, returns and competition matter more. But when two products are close, the rate can decide it.
The Rs 2,500 line for clothes and shoes
For clothes and footwear, the rate depends on the sale value of each piece or pair. Up to Rs 2,500 it is 5%. Above that, 18%. So a small price rise can cost you a lot.
Take a kurta with a taxable value of Rs 2,499. GST at 5% is Rs 124.95, so the buyer pays Rs 2,623.95. Raise the taxable value to Rs 2,600 and GST becomes 18%, Rs 468. The buyer now pays Rs 3,068. To stay near the old price, you would have to absorb most of that jump. If your product sits close to Rs 2,500, price it with the line in mind. The exact base for the test, before or after GST and discounts, is worth confirming with your CA.
The hidden cost on 5% products
Marketplace commission, shipping and other fees carry 18% GST. A regular GST seller claims it back, as our article on ITC on marketplace commission explains. On an 18% product, that credit is used up against your output GST easily.
On a 5% product, it may not be. If fees are Rs 300 on a sale of Rs 1,124, the GST on fees is Rs 54, almost the same as the Rs 56 you owe on the sale. Add GST on packing material bought at 18%, and credit starts piling up in your ledger. That money is yours, but it sits idle. The law allows a refund where credit builds up because inputs are taxed higher than outputs, but the formula has limits. Credit on services such as fees is generally left out of it, so ask a CA before you count on it.
The mistake sellers make
The usual mistake is to copy the GST rate from a competitor's listing or from a list for the whole category. Rates follow the HSN code and, for clothes and shoes, the price. A wrong rate is wrong on every invoice. Too low, and you pay the difference with interest from your own margin. Too high, and you overcharge buyers and price yourself out.
What should you do today? List your top five products with their HSN codes, current rates and selling prices. Mark any within a few hundred rupees of a Rs 2,500 line. That one sheet will improve every pricing call you make, and our guide on how to price products for online selling takes it from there.
Sources
- GST Council: recommendations of the 56th meeting, rates and effective date (checked 13 Nov 2026)
- CGST Act, section 54(3) on refund of accumulated credit (checked 13 Nov 2026)
How AprilTax can help
Once you sell, every invoice carries the rate you chose, and the HSN summary in GSTR-1 has to match it. The free AprilTax GSTR-1 tool reads your Amazon, Flipkart or Meesho sales reports, prepares GSTR-1 with the HSN and rate-wise tables, and runs about 30 checks before you upload the JSON on the GST portal. Try the free GSTR-1 tool with your next month's reports.
Frequently asked questions
What are the GST rates on goods after September 2025?
If the buyer pays GST, why does the rate affect my profit?
What is the GST rate on clothes now?
What is the GST rate on footwear?
How do I work out my taxable value from a GST-inclusive price?
Why does input tax credit pile up on 5% products?
Can I use a competitor's GST rate for my product?
File your GSTR-1 free
AprilTax turns your Amazon, Flipkart and Meesho reports into a GSTR-1 file ready for the GST portal, with the checks done for you.
Open the free toolWhat sellers say
4.9 on Google →Read next
Stuck on a return or registration?
File GSTR-1 free with the tool, or hand it to a Tax Expert at a fixed fee.