The GST Council, consisting of Finance Minister Arun Jaitley, has decided the rate of the four tier GST tax structure. The slabs have been set at 5%, 12%, 18% and 28% with the lower tax rates on essential items and the highest on luxury goods, minus the additional cess on them. The earlier proposed rates by the government stood at 6%, 12%, 18% and 26%.
The GST for tobacco products, aerated drinks and luxury cars will be fixed depending the level of cess they attract. The highest tax slab will be applicable to items that are taxed at 30-31% now. To keep inflation under check, essential items like food will be taxed at zero rate.
The GST rates are expected to be put into effect from April 1, 2017. The tax rate decided today must still be approved by the parliament when it meets for the winter session, wherein it has to pass two bills related to GST. After the fitment and categorisation of the items for each slab is done, the GST council will approve it.
The GST now has no indirect levies on goods that cross state lines, unifying India as a whole. The collection from cess and clean energy cess will create a revenue pool to compensate any state that faces loss of revenue due to the implementation of GST, estimated at Rs 50,000 crore.
Feature Image Credit: CFO India