The government has categorized 1211 items under various tax slabs. With GST set to be implemented from July 1 2017, here’s the guide to what are GST Tax rates, how much tax you’ll have to pay on most use items and how it affects your budget.

What is GST?

The Goods and Services tax or commonly referred to as the GST will replace the indirect taxes levied by the Central and State Governments and provide for a single and streamlined process.  GST eliminates the cascading effect of taxes which is very prevalent in our economy. The tax will be implemented at every step of value creation. GST is being hailed as the game changer for India’s economy and is being labelled as the biggest change in the Constitution since India’s independence.  It presents India as a unified market to business owners and also aims at bringing a lot of black money back into the mainstream economy as it will be very difficult for black money owners to participate anywhere in the value chain with the GST without accounting for all other transactions.

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

What are GST rate slabs?

The Goods and Services Tax (GST) will be levied at multiple rates ranging from 0 per cent to 28 per cent. Under GST, there are seven tax slabs, namely nil, 0.25%, 3%, 5%, 12%, 18% and 28% with an additional cess on sin and luxury items, and a mind-boggling 1,211 items in the tax list.  GST Council has finalized a four-tier GST tax structure of 5%, 12%, 18% and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess.

• Service Tax will go up from 15% to 18%. The services being taxed at lower rates such as train tickets, will fall in the lower slabs.
• In order to control inflation, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.
• The lowest rate of 5% would be for common use items.
• 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.
• Highest tax slab will be applicable to items which are currently taxed at 30-31% (excise duty plus VAT).
• Ultra luxuries, demerit and sin goods (like tobacco and aerated drinks), will attract a cess for a period of five years on top of the 28 per cent GST.
• The collection from this cess as well as that of the clean energy 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. Finance minister said that the cess would be lapsable after five years.

GST Tax Slabs

No GST tax

• Goods: No tax will be imposed on items like Jute, 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, Bones and horn cores, bone grist, bone meal, etc.; hoof meal, horn meal, Cereal grains hulled, Palmyra jaggery, Salt – all types, Kajal, Children’s’ picture, drawing or colouring book, Human hair
• Services: Hotels and lodges with tariff below Rs 1,000, Grandfathering service has been exempted under GST.

0.25%  GST Tax

5% GST Tax

• Goods: Items such as fish fillet, Apparel below Rs 1000, packaged food items, footwear below Rs 500, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, kerosene, coal, medicines, stent, lifeboats, Cashew nut, Cashew nut in shell, Raisin, Ice and snow, Bio gas, Insulin, Agarbatti, Kites, Postage or revenue stamps, stamp-post marks, first-day covers.
• Services: Transport services (Railways, air transport), small restaurants will be under the 5% category because their main input is petroleum, which is outside GST ambit.

12% GST Tax

• Goods: Apparel above Rs 1000, frozen meat products , butter, cheese, ghee, dry fruits in packaged form, animal fat, sausage, fruit juices, Bhutia, namkeen, Ayurvedic medicines, tooth powder, agarbatti, colouring books, picture books, umbrella, sewing machine, cellphones, Ketchup & Sauces, All diagnostic kits and reagents, Exercise books and note books, Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs, Spectacles, corrective, Playing cards, chess board, carom board and other board games like ludo,
• Services: Non-AC hotels, business class air ticket, fertilisers, Work Contracts will fall under 12 percent GST tax slab

18% GST Tax Slab

• Goods: Most items are under this tax slab which include footwear costing more than Rs 500, Bidi Patta, Biscuits (All catogories), flavoured refined sugar, pasta, cornflakes, pastries and cakes, preserved vegetables, jams, soups, ice cream, instant food mixes, mineral water, tissues, envelopes, tampons, note books, steel products, printed circuits, camera, speakers and monitors, Kajal pencil sticks, Headgear and parts thereof, Aluminium foil, Weighing Machinery [other than electric or electronic weighing machinery], Printers [other than multifunction printers], Electrical Transformer, CCTV,Optical Fiber, Bamboo furniture, Swimming pools and padding pools, Curry paste; mayonnaise and salad dressings; mixed condiments and mixed seasonings
• Services: AC hotels that serve liquor, telecom services, IT services, branded garments and financial services will attract 18 per cent tax under GST.

28% GST Tax

• Goods: Bidis, chewing gum, molasses, chocolate not containing cocoa, waffles and wafers coated with choclate, 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.
• Services: 5-star hotels, race club betting, cinema will attract tax 28 per cent tax slab under GST

How GST affects your Household budget?

Household budget is likely to get cheaper once GST is rolled out on July 1, 2017. Analysis show that food items will get cheaper as they are housed under 5% GST as against 12.5% currently.  Entertainment activities, household and personal care products will become cheaper under the upcoming regime. On the other hand, most of the services like mobile phone services, healthcare and transportation which are currently charged at the rate of 15% will cost more, as these are expected to attract 18% tax under the GST regime.  For manufactured consumer goods, the current tax regime means the consumer pays approximately 25%-26% more than the cost of production due to VAT (value added tax) and excise duty. So with the GST rate expected to be 18% for most goods, they are expected to become cheaper.

Preliminary analysis show that a hosuehold currently spending Rs 74,350 per month will see a saving of Rs 2000 per month

Current Tax Regime 0 . I Amount Under GST 0 Regime II ■ it Housing*  Food 10000 12.5 11250 5 10500 Entertainment 5000 30 6500 28 6400 ositive Transportation 4000 15 4600 18 4720 gative Healthcare 5000 15 5750 18 5900 gativ Household Personal Care 10000 28 12800 18 11800 ositive Mobile Phone Services 3000 15 3450 18 3540 Utilities* 5000 0 5000 0 5000 No Change Education* 10000 0 10000 0 10000 No Change

Related Articles

GST Bill : Good and Services Tax