Four-tier Goods and Services Tax structure approved in India

How the new slabs will affect pockets

Business & Politics

News - Biz@India

November 5, 2016

/ By / New Delhi

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GST will be a powerful change to knock out the outpour of many central and state taxes

GST will be a powerful change to knock out the outpour of many central and state taxes

A four-tier Goods and Services Tax (GST) structure that was proposed by the GST council headed by the Indian Finance Minister, Arun Jaitley, in October this year, was passed on November 3.

The Goods and Services Tax (GST) council headed by the Indian Finance Minister, Arun Jaitley, proposed a four-tier GST bill structure and rates on the first day of the GST meeting that took place between October 18-20. The proposal was passed on November 3, which will be a powerful change to weed out the outpour of many central and state taxes.

GST council has agreed on a rate structure of 0 pc, 5 pc, 12 pc, 18 pc and 28 pc. The highest tax level will be 28 pc, applicable on items which are currently taxed at around 30 pc. However, some of the goods taxed at 28 pc will also be charged with an additional amount for five years.

Under the current Indian Taxation System, central government collects Value Added Taxes (VAT) and levies income tax, customs duties, central excise, services, stamp duty, state excise, land revenue etc. Furthermore, states also levy their own taxes that vary from one state to another. However, the introduction of GST will set forth a single tax structure, eliminating many centres and state taxes.

Tax inequalities and intermediate barriers will be waived with the unification of taxes and also eliminate challenges for inter-state movement of goods and commerce and inter-state price differences along with reduced tax invasion.

Changes in Taxation

While almost all services will be taxed at a standard rate of 18 pc, flow of VAT, CST, entry tax and additional customs duty will not exist in the GST regime. However, many services are expected to cost more due to increase in tax rates.

To check the status of inflation, everyday use and essential items including food will be taxed at zero per cent. Luxury cars, tobacco and aerated drinks will fall under the category of 28 pc tax rates and will additionally be charged with an extra cess, while goods like chicken, coconut oil, refined oil, mustard, groundnut oil, turmeric, black pepper, cumin seeds, coriander and oil seeds will be charged at 5 pc tax rate.

Electronic items including television sets, air conditioners, washing machines, inverters, refrigerators, electric fans and cooking appliances; along with toiletry like perfumes, shaving cream, powder, hair oil, shampoo and soap may become a little cheaper with taxes reducing from 29 pc to 28 pc.

However, gas stoves, gas burner, mosquito repellent and insecticides will cost more as in comparison with the current 25 pc tax rate; they will now be taxed at 28 pc.

The GST regime was expected to bring down the prices of small cars but upon implementation of the new taxation system, cars will cost approximately the same, as currently small cars are taxed at around 30 pc and will fall under the 18 percent tax slab under GST.

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