GST Council decides four-tier rate structure of 5%, 12%, 18% and 28%

The GST Council in its fourth meeting held on November 03, 2016, has finalised the GST rates. The finalised rates are 5, 12, 18 and 28 percent. The lower rate is for essential items and highest rate is for luxury goods. The GST rate on Gold has not been decided yet but the rate of service tax will go up from 15 percent to 18 percent.

In the last meeting held in October, Centre proposed four tier rates which are 6, 12, 18 and 26 percent. The rates have been approved by the GST council after some tinkering with the earlier proposed slabs.

The Hon’ble Finance Minister, Arun Jaitley, said that the Sin items such as tobacco, aerated drinks, pan masala, luxury car, etc., will be taxed at more than 28 percent as additional cess will be levied on these. Items constituting half of the consumer price index (CPI) basket including food grain, will be exempt. He also pointed out that the Corpus of Rs.50, 000 Crore would be needed to fund compensation to the States in the first year.

It would give a little more relief to the poor and a little more grief to the rich in the goods and services tax. The additional cess and a clean energy cess will create a revenue pool which will be used to compensate States for any loss of revenue during the first five years of the implementation of GST. The cess, Jaitley said, will not be an additional burden on the taxpayers because higher rate of 28% and cess will not exceed the total of the existing levies.