APPROVAL OF GST RATES BY COUNCIL
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 10-11-2016
The GST Council in its fourth sitting on 3-4 November, 2016 zeroed in at the GST rates with consensus amongst all the states and the centre. The tax rates have been set in a four slab tax structure of 5 percent, 12 percent, 18 percent and 28 percent with lower rates for essential items and higher rates for luxury and demerit goods. Such items may also attract an additional cess to create a corpus for funding requirements for any revenue loss to be compensated by the centre to the States, if such a situation arises.
In fact, there will be seven rates of taxes as follows:
0%
Exempted goods
5%
Necessary / daily use go
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in classification issues leading to tax disputes and hence, the litigation.
It is hoped that about 50 percent of the good in consumer price index basket and items of mass consumption shall be exempt or zero rated which will essentially include food grains. On the other end, top of bracket of 28% and of course, cess, shall be levied on luxury goods and cars / tobacco products. Such goods which suffer a higher tax will hardly be beneficial to consumers or tax payers.
The 5% tax rate will be on items of common use. Most of the other items will be subject to 12% and 18% tax which still will be lower than the existing tax impact (central excise plus service tax).
The overall tax rate structure may lead to inflation as services shall become c
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