The GST Council on Tuesday finalised a 4-tier tax structure of 5, 12, 18 and 28 per cent, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess. Anncouncing the decision arrived at the first day of the two-day GST Council meeting, Finance Minister Arun Jaitley told reporters that to keep inflation under check, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.
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The Goods and Services Tax (GST) is the biggest reform in India’s indirect tax structure since the economy began to be opened up 25 years ago.
Here are the five features of the new slab
#The lowest rate of 5 per cent would be for common use items while there would be two standard rates of 12 and 18 per cent under the GST regime, targeted to be rolled out from April 1, 2017.
#Highest tax slab will be applicable to items which are currently taxed at 30-31 per cent (excise duty plus VAT).
#Tobacco will fetch 28 percent sin tax, excluding cess. Aerated drinks will also fetch tax at the same rate. Most white goods to be taxed at 28 percent but with riders.
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#About 50 percent of products in the consumer basket, such as foodgrains, has been kept as ‘zero-rated’.
#Rs 50,000 crore would be needed to compensate states for loss of revenue from 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.