GST Rate Structure Finalized, Panel Fixes Rates At 5%, 12%, 18% & 28%
NEW DELHI: A 4-tier GST tax structure of 5%, 12%, 18% & 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also engage an additional cess, was decided by the all- powerful GST Council on Thursday.
With a view to keeping expansion under check, essential items including food, which presently constitute roughly half of the consumer inflation ca, will be taxed at zero rate.
The lowest rate of 5% would be for common use items while there would be two standard rate of 12% and 18% under the Goods and Services Tax (GST) regime targetted to be rolled out from April 1, 2017.
Announcing the judgment arrived at the first day of the crate wo-day GST Council meeting, finance minister Arun Jaitley said highest rate will be applicable to items which are currently taxed at 30-31% (excise duty plus VAT).
Luxury cars, tobacco & oxygenate drinks would also be levied with an additional cess on top of the highest tax rate.
The collection from tax as well as that of the clean energy cess would create a revenue pool which would be used for compensating states for every loss of revenue during the first five years of implementation of GST.
The cess, he said, would be lapsable after five or six years. Jaitley said about Rs 50,000 crore would be needed to compensate states for loss of revenue from rollout of Goods and service tax, which is to subsume a host of central and state taxes like excise duty, service tax and VALUE ADDED TAX, in the first year.
The 4-tier tax structure agreed to has slight modification to the 6%, 12%, 18% and 26% slab that were under discussion at the GST Council last month.