GST 2.0: What the New Tax Slabs Mean for Your Business

GST 2.0 rolled out a major simplification of India's Goods and Services Tax structure, collapsing the old four-slab system (5%, 12%, 18%, 28%) into a leaner two-rate structure of primarily 5% and 18%, with a narrow special rate reserved for select luxury and sin goods. For businesses across Chennai and Tamil Nadu, the change looked simple on paper but has triggered a wave of practical compliance questions in the months since.

The first issue we see repeatedly is HSN/SAC re-classification. Products and services that sat at 12% or 28% have been redistributed across the new slabs, and many businesses simply updated their billing software's default rate without checking whether their specific HSN code actually moved to 5% or 18%. An incorrect rate on an invoice is not a clerical footnote — it can trigger demand notices for short payment, or disputes with customers over incorrectly charged tax that they later refuse to reimburse.

The second issue is input tax credit continuity. Vendors upstream in a supply chain who are slow to update their own billing systems can pass on invoices at outdated rates, creating mismatches between what a business claims as ITC and what actually appears in its GSTR-2B. These mismatches are exactly the kind of discrepancy that draws automated scrutiny and, eventually, a show-cause notice.

The third issue is contracts and pricing that were fixed before the slab change. Long-term supply agreements, AMC contracts, and lease arrangements that quoted an all-inclusive price under the old rate structure need to be revisited — not renegotiated from scratch, but reviewed to confirm who bears the difference between the old and new tax burden, and whether the contract's tax clause actually says so.

If your business has not yet done a slab-by-slab audit of your product and service catalogue against the new GST 2.0 rate schedule, that is the single most useful first step — before a mismatch shows up as a notice rather than a question. Our GST & Tax practice advises businesses across Chennai and Tamil Nadu on rate classification, ITC reconciliation, and contract review during this transition.