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GST Tax Slab Rates : Council fixes 4-level GST rate structure

GST Tax Slab Rates: Council fixes 4-level GST rate structure

GST Tax Slab Rates : India finalized a four-tier Goods and Services Tax (GST) structure – ranging from 5% to 28% – taking a significant step towards implementing the biggest reform of indirect taxes, which the government hopes will shield the common man from price shocks.

The fixing of rates by the GST Council marks a crucial milestone towards the roll out of the single tax that will replace various state and central levies and create a seamless national market for goods and services.

GST Slab rates Finalized on 18th may 2017

What’s so good about the new tax?
Those 17 or more state and federal levies on everything from electricity to Gucci handbags complicate efforts to sell products to India’s population of 1.3 billion (about four times bigger than the U.S.). Under the current system, a product will be taxed multiple times and at different rates. Every day, for instance, more than 20,000 truck drivers wait in queues up to three kilometres (1.8 miles) long to pay an entry fee at the New Delhi checkpoints, with food rotting, tempers fraying and costs rising. In another change, the GST will apply to goods at the point of consumption, rather than where they are produced. That will reduce the cascading effect of taxes, allowing producers to easily claim credits and minimising the opportunity for corruption. India will join 160 nations that have a value added tax, including Poland, Canada and Japan. At the top rate, India’s GST will be among the highest.  Revenue Secratery Hasmukh Adhia said: “Nearly 81 percent of the items will fall under below18 per cent GST rate slabs and only 19 per cent of the goods will be taxed above 18 per cent.”

The tax slabs will comprise four basic rates: 5 percent, 12 percent, 18 percent and 28 percent. Sugar, Tea, Coffee (except Instant) and edible oil to fall under 5 per cent slab, while cereals, milk to be part of exempt list under GST. The rate for capital good & industrial intermediate items at 18 per cent. Coal to be taxed at 5 percent against current 11.69 per cent. Toothpaste, hair oil, soaps will be taxed at 18 percent, it is being tax at 28 percent, currently. Common man items have gone into 12 per cent and 18 per cent slab. Indians sweets or mithai in 5 per cent slab. All raw food items, including food grains to be exempt. Processed food of daily needs to be in the 5% slab. Luxury cars will attract 28 per cent levy plus a cess of 15 per cent, while small petrol cars will face 28 percent tax plus 1 per cent cess. Diesel small cars will be taxed at 28 percent with 3 percent cess. Consumer durables, which face a total tax of about 32 percent currently, will be placed in the 28 per cent slab. All chemicals and intermediate goods will be placed in the 18 per cent slab.

GST rate schedule of goods

Revised return rules as approved by GST council on 18th may 2017

Revised Refund rules as approved by GST Council on 18th may 2017

Revised payment rules as approved by GST council on 18th may 2017

Revised invoice rules as approved by GST council on 18th may 2017

ITC rules as approved by GST council on 18th may 2017

Transition rules as approved by GST council on 18th may 2017

Valuation rules as approved by GST council on 18th may 2017

Recommended Read : Here’s the GST Zero rated list : Know what is cheaper

 GST Tax Slab rates: Council fixes 4-level GST Tax Slab Rates structure



The Centre’s original proposal of 6% as the threshold rate and 26% as the highest slab was tweaked after states including Kerala said they wanted the lowest slab at 5%, the current threshold rate for value-added tax in many states.

GST would be broadly tax-neutral, Jaitley said. The minister said he hoped the total indirect tax incidence on the people would come down with the seamless input tax credit that would reduce effective tax on goods.

Recommended Read : GST Council rates set at 5, 12, 18, 28% : Parliament can now take up legislations in Winter Session

 Council fixes 4-level GST rate structure : AAM AADMI BURDEN
The aam aadmi’s grocery bill may not rise as the GST Council, the apex decision-making body for the tax, decided to exempt food items or keep most of them at the lowest rate of 5%.

More than 50% of the items in the Consumer Price Index basket would be exempted under GST and the remainder placed in the lowest bracket. Exempted items won’t have the benefit of input tax credit.



Sports utility vehicles, aerated drinks, pan masala and tobacco products are unlikely to see any change in their overall tax burden with a new cess proposed on them.

Tobacco currently attracts a total tax of about 65% and for aerated drinks, the current rate is about 40%. These goods will be taxed at the highest rate of 28% and topped up with a cess to raise the effective tax.

Soaps, oil, shaving kits, small cars and other goods consumed by the middle class, which faces higher tax incidence of 30-31% including state and central taxes, could become cheaper as they are likely to be placed in the lower tax slab of 18% and not the equivalent tax slab of 28%.

“…finally, the consensus is that these items with cascading effect of 30-31% will now be taxed at 28%, but with a rider. And the rider is that in this category there are several items which are now being used increasingly by a very large number of people, particularly the lower middle class. So for them, 28% or 30% or 31% will be higher and so we are transferring them to 18%,” said Jaitley, who chairs the council that has state ministers as members.

Also Read: GST a win-win deal for both Indian industry and aam aadmi

Here are the five features of the new GST Tax Slab Rates

#The lowest rate of 5 per cent would be for common use items while there would be two standard rates of 12 and 18 per cent under the GST Tax Slab Rates regime, targeted to be rolled out from April 1, 2017.

#Highest tax slab will be applicable to items which are currently taxed at 30-31 per cent (excise duty plus VAT).

#Tobacco will fetch 28 percent sin tax, excluding cess. Aerated drinks will also fetch tax at the same rate. Most white goods to be taxed at 28 percent but with riders.

Chief Economic Adviser Arvind Subramanian said the tweaking of the rate structure should help ease inflation. “On average, this should probably serve to lower inflation. If at all, the impact on inflation will be very small. Today’s change should probably bring it down,” he said.

The cess, which would be equal to the difference between the current tax rate and highest GST slab of 28%, would be used to create a Rs 50,000-crore fund to compensate states that lose revenue under the new tax regime.

A separate compensation pool would be created with a sunset clause of five years after which the levy would be reviewed by the Council, Jaitley said. He said Kerala had suggested that the highest tax slab of 28% be raised to 40%, but the proposal for the cess found wider acceptance in the Council as a higher tax would have increased the overall burden on taxpayers to Rs 1.72 lakh crore.

“Decisions were unanimous… Even finance ministers of Congress-ruled states supported the proposal,” Jaitley said.

A decision on the services bracket would be taken later, although it would most likely attract the standard rate of 18%, Revenue Secretary Hasmukh Adhia said.

He added that some of the services that enjoy higher abatement would be put in the lower tax slabs of 12% or 5%, depending on their current overall tax incidence.

“A committee of officials would decide which items would go in which tax bracket, but it would be decided keeping in mind the overall tax incidence currently,” Adhia said. Exports and special economic zones would be zero-rated, he said.

Finance Secretary Ashok Lavasa said multiple rates had been decided keeping consumer interest in mind.

Such a structure was seen as inevitable to protect consumers even though they would complicate GST and open it to classification disputes. The Confederation of All India Traders, a body of retailers, pitched for administrative simplification.

“The Confederation of All India Traders has categorically demanded that irrespective of rates, there should be one single return and single authority to control the taxation system and only then the tax net will be widened and revenue will be increased,” it said in a statement.

Recommended Read : GST compensation bill to detail revenue foregone by states

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