Understanding the ₹2,500 Slab under GST 2.0

The introduction of GST 2.0 has brought significant changes to the taxation system in the federal economy of India. One of the key aspects of GST 2.0 is the new tax slab structure, which has implications for consumers as well as businesses.

GST 2.0 Tax Slabs

GST 2.0 has simplified the tax structure by consolidating multiple tax slabs into two main slabs: 5% and 18%. Additionally, there is a higher tax slab for luxury and sin goods, i.e 40%. Essential goods and services have been kept under the lower tax slab or exempted altogether.

Impact on Clothing and Footwear

– Apparel and footwear priced up to ₹2,500 (Chapter/Heading/Sub- heading/Tariff – 61, 62, 63 & 64): Attracts a 5% GST rate, benefiting consumers with a 7% reduction from the previous 12% rate for items above ₹1,000.
– Apparel and footwear priced above ₹2,500: Attracts an 18% GST rate, resulting in a 6% increase from the previous 12% rate.

Decoding Discounts:

– Simple Discount: A shirt or one pair of shoes priced at ₹3,000 with a discount of ₹500, making the transaction value ₹2,500. In this case, the GST rate would be 5% since the final transaction value is less than or equal to ₹2,500. In case the discount is ₹499, making the transaction value ₹2,501. In this case, the GST rate would be 18%, transaction value being higher than ₹2,500.

– Credit Card Discounts (Especially Cash Back offers): A piece of clothing or a pair of sneakers priced at ₹3,000, with a credit card discount of ₹1,000 (cash back). Here, the GST rate would be 18% on the original price of ₹3,000 as the transaction value is higher than ₹2,500 because the discount will be credited in the bank account of the beneficiary.

Examples

– Case 1: A shirt priced at ₹2,000 with no discount. GST rate: 5%, Total amount payable: ₹2,100.

– Case 2: A shirt priced at ₹3,000 with a discount of ₹500, making the transaction value ₹2,500. GST rate: 5%, Total amount payable: ₹2,625.

– Case 3: A shirt priced at ₹3,000, with a credit card discount of ₹1,000 (cash back). GST rate: 18%, Total amount payable: ₹3,540.

– Case 4: Buy One Get One Free (BOGO) offer on a shirt priced at ₹4,999. GST would be calculated on the transaction value of the paid item, which is ₹4,999. GST rate: 18%, GST amount: ₹899.82, Total amount payable: ₹5,898.82.

Key Takeaways

– The GST rate depends on the transaction value, not the original price.
– Discounts on invoices can reduce the GST liability if the transaction value is less than or equal to ₹2,500.
– Credit card discounts in the form of cash back do not reduce the GST liability, and the GST rate applies to the original price.
– In a “Buy One Get One Free” offer, GST is calculated on the transaction value of the paid item.

By understanding the mathematics of discounts and GST rates, consumers and businesses can understand the new tax regime effectively and make informed decisions.

(Please refer to Chapter Numbers 61, 62, 63 & 64- Notification No. 9/2025-Central Tax (Rate) , Dated: 17th September, 2025, MINISTRY OF FINANCE, Department of Revenue)