GST Tax Structure
GST
council meet on Thursday 3rd of November, 2016 came with a four tier
GST tax structure differentiating the rates as per the goods and services. The
rates have been decided according to use of the goods and services for eg. essential
items including food, which presently constitute roughly half of the consumer
inflation basket, will be taxed at zero rate whereas luxury cars, tobacco and
aerated drinks would also be levied with an additional cess on top of the
highest tax rate.
The approved slabs vary slightly
from the proposal the Centre had moved at the Council’s last meeting.
Most services are expected to
become costlier as the ones being taxed currently at the rate of 15 per cent
are likely to be put in the 18-per cent slab, said Revenue Secretary Hasmukh
Adhia. The services being taxed at lower rates, owing to the provision of
abatement, such as train tickets, will fall in the lower slabs, Mr. Adhia
added.
On
the luxury products additional cess would create a revenue pool which would be
used for compensating states for any loss of revenue during the first five
years of implementation of GST.
Jaitley said about Rs 50,000
crore would be needed to compensate states for loss of revenue from 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.
There would be two standard rates of 12 per cent and 18 per cent, which would fall on the bulk of the goods and services. This includes fast-moving consumer goods.
The GST will subsume the
multitude of cesses currently in place, including the Swachh Bharat Cess, the
Krishi Kalyan Cess and the Education Cess. Only the Clean Environment Cess is
being retained, revenues from which will also fund the compensations.
The Council did not take a call
on the GST rate on gold. “GST rate on gold will be finalised after the fitting
to the approved rates structure of all items is completed and there is some
idea of revenue projections,” Mr. Jaitley said.
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