New Delhi: The GST Council, a high-powered forum of the Centre and all state governments, on Thursday decided to fix a four-tier GST rate structure — of five per cent, 12 per cent, 18 per cent and 28 per cent — targeted for rollout from April 1, 2017. However, many products in this category like soap, toothpaste, oil, shaving sticks and even refrigerators, among others, which are used by the lower middle class, will be moved lower to the 18 per cent tax slab in GST. Services will not be taxed at rates higher than 18 per cent.
The decision at what rate gold should be taxed will be taken later. Small cars are also likely to be taxed at 28 per cent. Car companies said in case small cars are taxed at 28 per cent, there will be no scope to slash their prices after the introduction of GST, as was expected earlier. Mr Jaitley said that only one tax rate under GST would have been “highly inflationary”.
The four-tier tax structure that was agreed to is a slight modification of the six, 12, 18 and 26 per cent slabs that were proposed, that were discussed at the GST Council meeting last month. It is estimated that Rs 50,000 crore will be needed to compensate the states for the loss of revenue from the rollout of GST, which is to subsume a host of Central and state taxes like excise duty, service tax and VAT, in the first year beginning April 1.
Chief economic adviser Arvind Subramanian said the rate structure “should probably serve to lower inflation.. and should probably bring it down”. “A lower rate of five per cent for mass consumption items along with zero tax structure for essential commodities will make GST less regressive and more pocket-friendly for the common man,” said Rajeev Dimri, leader (indirect tax) at BMR and Associates LLP.
