The government of India on Thursday, announced the 4-tier Goods and Services Tax (GST) tax structure. The four panel rates have been fixed at 5, 12, 18 and 28%. The taxes will be rolled out from 1 April, 2017. Here are a few of the items which will be taxed:
0% standard tax
Food grains will be zero-rated. This will help insulate people from inflationary pressures.
This lowest tax rate will apply to essential and common utility items such as soaps.
Standard taxes: 12% & 18%
Some products such as soaps, oil and shaving sticks, which would have gone into the 28% bracket, will now move to the 18% slab. Small cars may attracts 12.5% excise duty.
28% and above standard tax
This is the highest tax slab which will be applicable to items which are currently taxed at 30-31% (excise duty plus VAT). Luxury cars, tobacco and aerated drinks will also be levied an additional cess on top of the highest tax rate.
Service Tax will go up from 15% to 18 %, said Revenue Secretary Hasmukh Adhia.
The fifth rate for gold and precious metals, which was earlier proposed at 4%, will be decided later but is likely to be lower.
The collection from this cess as well as that of the clean energy cess will create a revenue pool which will be used for compensating states for any loss of revenue during the first five years of implementation of GST. The cess will lapse after five years.
Union finance minister Arun Jaitley said about Rs 50,000 crore will be needed to compensate states for loss of revenue from the rollout of GST, which is to subsume a host of central and state taxes like excise duty, service tax and VAT, in the first year.