The Goods and Services Tax (GST) is a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India to replace taxes levied by the central and state governments.
The Goods and Services Tax (GST) council Thursday fixed tax rates on 1211 items, most of which will likely become cheaper.
Goods and Services Tax (GST) is an upcoming system of taxation in India which will merge many individually applied taxes into a single tax. It was introduced as The Constitution (One Hundred and First Amendment) Act 2016, following the passage of Constitution 122nd Amendment Bill. The GST is governed by GST Council and its Chairman is Union Finance Minister of India, Arun Jaitley.
The Goods and Services Tax (GST) Council on Friday finalised four tax rates of 5, 12, 18 and 28 per cent to apply on services including telecom, insurance, hotels and restaurants under the biggest tax reform since independence.
According to Revenue Secretary Hasmukh Adhia, the council has also decided a 1 per cent Tax Collected at Source (TCS) rate for e-commerce players such as Flipkart, Snapdeal,even though the law provides for a levy for 2 per cent tax rate.
Aiming to keep most items, especially those of mass consumption, at affordable prices, the states and the Centre evolved a consensus on the first day of the 14th Goods and Services Tax (GST) Council meeting on Thursday to keep 81 per cent of a total of 1,211 items at the modal tax rate of 18 per cent or below.
Food grains, including cereals and jaggery, have been exempted with a zero per cent tax slab, while essential items of normal sugar, tea, coffee and edible oil have been placed in the 5 per cent tax slab. The GST on items such as toothpaste, soap and hair oil will be 18 per cent as against the present total tax incidence of 28 per cent and above.
Dairy products like milk and natural honey will not be taxed but cell phones will be taxed at 12% and cigarettes and cars will attract the highest tax rate of 28% plus cess under the proposed goods and services tax (GST) regime kicking in from 1 July, according to the detailed list of tax rates released late on Thursday evening by the federal indirect tax body, the GST Council.
5% GST: Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion, other than coffee beans not roasted. Tea, whether or not flavoured, other than unprocessed green leaves of tea. Maté. Pepper of the genus Piper; dried or crushed or ground fruits of the genus Capsicum or of the genus Pimenta. Vanilla.
Chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with chocolate, pan masala, aerated water, paint, deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen, wallpaper, ceramic tiles, water heater, dishwasher, weighing machine, washing machine, ATM, vending machines, vacuum cleaner, shavers, hair clippers, automobiles, motorcycles, aircraft for personal use, will attract 28 % tax – the highest under GST system.
Coming down hard on tobacco, cigarettes and cars, the Council decided on the cess rates for demerit and luxury items.
5-star hotels, race club betting, cinema will attract tax 28 per cent tax slab under GST
No tax Goods
No tax will be imposed on items like fresh meat, fish chicken, eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour, besan, bread, prasad, salt, bindi. Sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, etc.
The Council specified that the list of fitting goods into various tax slabs might undergo some changes, giving a window to stakeholders to quickly get their concerns addressed before the transition.
Businesses have about 40 days to brace for the transition with full clarity on the tax rates. Most large companies have already put in place software systems for GST.
The Council also gave final approval to seven rules pertaining to registration, payment, refund, invoice debit, credit note, input tax credit, valuation, and composition scheme, essential prerequisites for the industry to gear up for the transition to GST. Two rules on transition provisions and returns have been sent for legal vetting.