GST- One Nation, One Tax, Four Rates Finalised

3^rd November 2016 becomes the decisive day for finalization of GST rates in India . The authority to finalise GST rate i.e GST Council concludes its historical meeting on GST rate finalization on 3^rd November,2016.

The GST Council finally zeroed upon various GST rate slabs for levy and collection of GST taxes on various supplies of goods and services in India.

It must be noted that the States have also given their consent for levy of additional Cess on luxury and demerit goods. The levy of additional cess itself is aimed to create a pool for funding compensation to States for a period of 5 years.

GST Rate Slabs – The much awaited 4 tier GST rate slab as decided by GST Council are as below :

i. Lowest Slab @5% – Food items and other mass essentials.

ii. Standard Slab @ 12% – Substantial Goods & Services. 

iii. Middle Slab @ 18% – Rest Of Goods & Services.

iv. Highest Slab @28% – Luxury & Demerit goods.

Previous GST Rates Proposal in last GST Council Meeting – In last meeting of GST Council , held between 17^th to 19^th October,2016,,the Central Government proposed GST rate slabs at the rate of 6, 12, 18 and 26 %.

Hence, the lowest slab is reduced by 1% i.e from 6% to 5%. Whereas, the highest slab is enhanced by 2% i.e from 26% to 28%.

Levy on Precious Metals

The GST Council could not finalise the GST rate on Precious metals like gold . Whereas, it must be known  that in last meeting of GST Council ,held between 17th to 19th October 2016, it was proposed to be levied @ 4%.

Clean Environment Cess – An Additional Cess will be imposed on  luxury and demerit goods . It shall be levied on goods like selected luxury cars, aerated drink , alcohol, tobacco , pan masala etc .

Zero Rate 

There will be zero rate on 50% of items under CPI index basket and which includes food grain as well. This is not to be treated at par exempted goods as was clarified by Mr Jaitley during his press meet after the meeting of GST Council.

At the same , it must be known that zero rate tax is also levied on exported goods .

Crucial Aspects

The GST Council decided the GST rates with the following crucial factors :

a. Inflation Check – The focus will be to check the inflation and hence essential mass items including food will be taxed at zero rate.

Mr Jaitley emphasized that while there will be two standard tax rates – 12 percent and 18 percent – under the GST, half of the items in the consumer price index would not be taxed at all to safeguard the interests of the poor.

b. Food Items– Special treatment to certain food items is likely to continue and it will be exempted from the tax as well.

c. No Extra Burden of Cess on Consumers– The levy of Cess will not create an additional burden on consumers in as much as it shall be levied on those goods which are already attracting high rates of taxes .

Mr Jaitley also aired that the highest tax slab will be applicable to items which are currently taxed at 30-31% (excise duty + VAT). Luxury cars, tobacco and aerated drinks would also be levied with an additional cess on top of the highest tax rate.

 Guide to Enroll for GST Practitioner

Conclusion

Levy of GST on Services – GST rate may be between 12% to 18%. However, it must be known that there are catena of reports on the viability and implication of taxes on service sector . All such reports have concluded that any tax rate above 16% will be suicidal for the service industry.

Levy of GST on Goods – It will be very interesting to see the impact of 28% on FMCG goods .

Further, the basket for 5% GST rate will be a real challenge with respect to various goods of mass consumption.

Union Finance Minister Arun Jaitley addresses press conference on 4th GST council meet in New Delhi on Thursday. 03rd November 2016.

For an advance level understanding of GST, please keep referring www.gstprofs.in

by Anandaday Misshra, Founder Advocate , AMLEGALS 

( The author is one of the leading litigation and advisory advocate.  He is an eminent speaker and author on various laws including GST. He handles cases in various Tribunals  & High Courts of India. He can be contacted on anand@amlegals.com .For more, please refer www.amlegals.com )