The Goods and Services Tax (GST) will be levied at multiple rates ranging from 0 per cent to 28 per cent.
Ultra luxuries, demerit and sin goods, will attract a cess for a period of five years on top of the 28 per cent GST.
Overcoming opposition from some States, the GST Council finalised on Thursday a multiple-slab rate structure, including the cess, for the new indirect tax. The quantum of cess on each of these will depend on the current incidence of tax.
On nearly half of the consumer inflation basket, including food grains, the GST will be at 0 per cent, Council Chairman and Union Finance Minister Arun Jaitley told a media conference after the meeting.
The approved slabs vary slightly from the proposal the Centre had moved at the Council’s last meeting.
The lowest slab of 5 per cent will be for items of common consumption, Mr. Jaitley said.
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.
Most services are expected to become costlier as the ones being taxed currently at the rate of 15 per cent are likely to be put in the 18-per cent slab, said Revenue Secretary Hasmukh Adhia. The services being taxed at lower rates, owing to the provision of abatement, such as train tickets, will fall in the lower slabs, Mr. Adhia added.
The highest slab of 28 per cent will include white goods and all those items on which the current rate of incidence varies from 30-31 per cent.
The principle for determining the rate on each item will be to levy and collect the GST at the rate slab closest to the current tax incidence on it.
Mr. Jaitley said the Council will review annually the tax revenue raised from the cess that will fund compensations from the Centre to States for losses arising out of the transition to the GST.
The Centre gave a constitutional guarantee to States for making good these losses for a period of five years.
“If the revenue raised from the cess is found to be in excess of the sums needed to finance the compensations to States, the Council will decide to what use the surpluses will be put,” Mr. Jaitley said.
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.
Though on the expiry of the five-year period the cess will no longer be collected, the Council will, Mr. Jaitley said, revisit the GST rates on ultra luxury and demerit goods.
The Council did not take a call on the GST rate on gold. “GST rate on gold will be finalised after the fitting to the approved rates structure of all items is completed and there is some idea of revenue projections,” Mr. Jaitley said.
Published - November 03, 2016 05:10 pm IST
