Goods and Services Tax regime has subsumed a plethora of
indirect taxes into one single tax system. GST council, responsible for the
structure of this tax regime and creating the GST tax rate list, has not fixed rates on goods and services. The GST rates
fluctuate depending on socio-economic changes and feedback from suppliers and
consumers. The GST impact on economy is also a criterion that's taken into consideration when
deciding the tax rates under this regime.
Criteria of Tax Rates:
GST council decided that few goods are necessary household
items, and such products should have a lower tax rate. This decision meant that
the rates for some essential goods should be lowered. This is considered as one
of the criteria so that necessary items reach the maximum population without
burdening them with the additional costs of taxes. Earlier, some daily use
items that are considered to be essential for every household were exempted
from tax. Other items saw a change in tax rates. Lotteries and other such services are going to be taxed at 28%.
Whereas vegetables are exempted from taxes.
The structure of GST rates is simple, and it is arranged in 5
different tax slabs. 0% for the goods and services that are exempted from
taxes. 5% for products that are essential and are widely used by all classes of
society. And the other three slabs being 12%, 18% and 28% depending on
revisions and calculations made by the GST council.
Tax Rates of Goods and Services:
0% Tax Slab: Items that attract 0% tax rate are vegetables,
salt, bread, eggs, flour, newspaper, etc. The main intention for the majority
of food items to be exempted from taxes is to ensure that it is available to
everyone at affordable prices. Goods that are essential for every household are
kept under this slab. Commodities such as Sanitary Napkins, Music books,
Picture books, Colouring, and drawing books are all exempted from taxes.
Services that are kept under this tax rate are the bank charges,
and account services related to Jan Dhan Yojana.
5% Tax Slab: The
services and goods that are widely used but are not considered to be as
essential goods and services come under this tax slab. This is the lowest tax
slab. There is some discontent among some restaurants because of the Input Tax
Credit being removed under this tax rate. Goods that fall under this tax rate
are Insulin, Biogas, Walking sticks, Natural cork, Marble Rubble, Coir mats,
floor covering and matting, Chakki atta(wind-based) braille watches, braille
typewriters, etc. Other necessary braille items are all included in this tax
rate.
Services that come under this tax rate are tour operator,
renting of motor cab without fuel cost, radio taxi, transport services in AC,
Pilgrimage travel via non-scheduled or chartered flights, the printing of
newspapers, etc.
12% Tax Slab: Goods
and services that come under this tax slab are not luxuries, but they also
don't fall under the economic range. Goods such as Plastic beads, All
diagnostic kits, fixed speed diesel engines, playing cards, carrom board,
chessboard, corrective spectacles, intraocular lenses, Walkie Talkie used by
police, paramilitary and defense forces. Menthol and menthol crystals
etc.
Services that come under this tax rate are the construction of
buildings ( for the purpose of sale), Air travel ( Excluding economy),
Accommodation between Rs.1000 and Rs.2500, Hotel room tariff between Rs.1001
and Rs. 7500, movie tickets less than Rs. 100. Etc.
18% Tax slab: Goods
under 18% tax rate are aluminum foil, headgear and its parts, transformers,
industrial electronics, precast concrete pipes, dental wax, school bags,
handbags and shopping bags made of artificial plastic material, toilet cases,
cotton or jute, rear tractor tires and tubes, electrical filaments or discharge
lamps, winding wires, bamboo furniture, swimming and paddling pools,
televisions or monitors up to 32 inches in size, baby carriages. Etc.
Services that are under this tax rate are Outdoor catering, the
supply of work contract, the supply of food, party arrangements, and shamiana,
hotel accommodation for the value of Rs. Seven thousand five hundred one and
above, circus, theater, movie tickets with the amount of Rs. 100 or above
etc.
28% Tax Slab: This
is a tax slab that applies to "sin-products" and luxury goods and
services. This is the highest tax slab under GST, and there are seldom any
changes to the items and services in this tax slab. Recently lottery is added
under this tax rate. Goods such as sunscreen, pan masala, luxury cars, yachts,
hair clippers, etc. come under this tax slab. Services that come under this tax
slab are betting in casinos, gambling in a race, etc.
In the recent GST council meeting, they reached upon a decision
that the council will be levying a new tax slab of 0.25% to 3% on cut and
semi-precious polished stones. Its also decided that group insurance schemes
for paramilitary forces will be exempted. Along with that, GST is exempted for
Senior citizens for the administrative fee collected by NPS (National Pension
System).
There is a continuous revision of tax rates on all goods and
services. Feedback from different sections of suppliers and consumers is
considered, and the implementation of appropriate changes happens, depending on
that feedback. The GST council has made several changes to tax rates on
different items to accommodate a better balance for consumers and
suppliers.
Conclusion
The GST Council determines the GST tax rate list depending on
numerous factors. It aims to help the overall GST impact on economy, create
ease of doing business, remove the burden of taxes on the general population,
and levy balanced tax rates. GST council is also alert in taking feedback. For
example, There was a tax rate of 12% for state-run lotteries and 28% for
state-authorized lotteries. There was a demand for a uniform tax rate for
lotteries from a group of ministers. GST council considered this and announced
a change in the GST tax rate list for lotteries. With the new change, lotteries
are going to be taxed 14% CGST and 14% SGST. This new change will make the
total tax rate to become 28%.
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