Finance Minister Arun Jaitley on Thursday announced four-tier tax slabs of 5 per cent, 12 per cent, 18 per cent and 28 per cent under the goods and services tax (GST).
Jaitley heads the GST Council which comprises state finance ministers as members. The GST Council agreed on the rates, which now need an approval from the Parliament. The winter session of Parliament is schedule to take place on November 19.
The GST, if implemented, will incorporate various taxes such as excise, services tax, octroi and other levies. The Centre as well as the states will share the proceeds. The individual items that would belong top different tax slabs would be decided later, said Jaitley.
Here's how GST rate structure of 5-28% could impact you:
1. Several items, comprising around 50 per cent of the consumer inflation index, would not attract zero tax under GST, said Jaitley. The food grains used by common consumers would fall in zero tax category, he added.
2. Mass consumption items would fall under the 5 per cent GST rate, said Jaitley.
3. Two standard rates at which bulk of the goods would come under tax will be 12 per cent and 18 per cent, said the finance minister.
4. Several manufactured items including white goods are currently come under an excise rate of 12.5 per cent and VAT of 14.5 per cent. Tax rate on these items will now be 28 per cent, he said.
5. Several items which have increasingly been used by the lower middle class are likely to be taxed at 18 per cent, said Jaitley.
6. Luxury cars, tobacco and aerated drinks would also be levied with an additional cess on top of the highest tax rate, Jaitley said.
7. A zero tax on daily necessities as well as lower rate of 5 per cent for items of mass consumption will make the new Goods and Services Tax regime, to be rolled out from April next year, less regressive, tax experts said.
8. While the goods will have a multiple rate structure, no clarity is provided on rates applicable to services, said Prashant Deshpande of Deloitte Haskins & Sells. “Hopefully there will be a single rate structure.”
9. Sandeep Chilana of Shardul Amarchand Mangaldas said while the present approach is a departure from international practice of single GST rate, this collaborative and consultative approach should successfully address the peculiar social, political and economic complexities in India.
10. Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP said though zero rating of necessities is a welcome news, the actual benefit to consumer will depend on the items included in this category. “Limiting the zero rating to food grains or agri products may not lead to any significant reduction on tax costs for the consumers,” he said. “Lower rate of 5 per cent for items of mass consumption along with zero rated tax structure for essential commodities would make GST less regressive and pocket friendly for common man.”
(With inputs from PTI)