GST Council to fix rates for upto 5,000 items in April
Land Lease and rentals would also attract GST. However, the rate of taxation has not been yet decided.
New Delhi: Over 16 years after it was conceptualised by the Atal Bihari Vajpayee government, India on Wednesday inched closer to a unified tax regime with the Lok Sabha passing four supplementary legislations which will enable the government to roll out the landmark Goods and Services Tax Bill on July 1.
Explaining why the GST council has decided on multiple tax rates, he said one rate would be “highly regressive” as “hawai chappal and BMW cannot be taxed at the same rate”.
Currently food articles are not taxed and those will continue to be zero rated under the GST. All other commodities would be fitted into the nearest tax bracket, he added.
The GST Council has recommended a four-tier tax structure — 5, 12, 18 and 28 per cent. On top of the highest slab, a cess will be imposed on luxury and demerit goods to compensate the states for revenue loss in the first five years of GST implementation.
The GST Council will meet in April to thrash tax rate for upto 5,000 commodities and services under GST. Services will not be taxed more than 18 per cent under GST.
There will be zero tax on food grains used by the common man. The five per cent tax rate is expected to be imposed on most of the items of mass consumption by the common man.
The 12 and 18 per cent will be the standard rates under which most of products and services will be taxed. White goods, which currently have overall tax incidence of 30-31 per cent (including excise and VAT), will be tax 28 per cent under the GST regime.
However, many products in this category like soap, toothpaste, oil, shaving sticks and even refrigerator among others used by lower middle class likley to be moved lower to 18 per cent tax slab in GST.
However under GST luxury cars, tobacco, aerated drinks and pan masala will see imposition of cess over and above highest tax rate of 28 per cent. The cess will be for a period of five years and the revenue generated will be used to compensate the states.
The GST also has things that could attract ire of employees. Under the new regime, an employee getting free goods or services may attract tax.
Similarly, free or subsidised facilities provided to employees such as food and beverages at the workplace, sponsorship of club or fitness centres membership, cab facilities among others, will not be eligible for claiming input tax credit.