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GST Rates – Effective GST Rates in India

Ashish M. Shaji

| Updated: May 18, 2017 | Category: GST Advisory

GST Rates in India

Originally when the Goods and Service Tax Act, 2016[1] was implemented, GST rates structure was finalized and published by the GST Committee. Some commodities were kept in the high tax bracket but on scrutinizing, they found that these should be considered as necessities and not luxuries. In this article we described about GST Rates – Effective GST Rates in India.

This was considered a good sign of tax reform in India. The government has effectively made foods grains cheaper to improve the condition of the farmer. Few essential items such as cereals, food grains, and milk are exempted from GST. Most of the consumable products for common items have gone into 12% and 18 % GST bracket.

The government has shown its commitment to lower income group and farmers by either imposing a lower GST structure or by offering tax exemption. This is a good sign for the Indian economy.

Before applying for GST registration, it is advisable to check what the applicable tax rates for your business are and after successful registration what GST returns are required to be filed.

Currently Effective GST Rates in India

After incorporating all these changes, the current slab of GST rates majorly consists of these rates (0%, 0.25%, 5%, 12%, 18% and 28%). Following are the list of few of such items included in respective tax slabs:

  • 0% Tax Slab:

Products: – Milk, curd, food grains, raw foods, fresh meat, fish, chicken, eggs, natural honey, flour, fresh fruits and vegetables, bean, bread, Prasad, salt, bindi, sindoor, stamps, judicial papers, printed books, newspapers, bangles, handloom, plates and cups made of flowers, raw material used in brooms, etc.

Services: – chargeable services offered on basic savings bank deposit account under Pradhan Mantri Jan Dhan Yojana.

  • 0.25 % Tax Slab:

Cut and semi polished stones

  • 5 % Tax Slab:

Product: – Face mask, Sugar, tea, fish fillet, processed food item, skimmed milk powder, coffee, edible oil, branded paneer, sweets, bread, frozen vegetables, lifesaving drugs, coal, Domestic LPG, soyabean, groundnut, boats, fishing vehicles, natural cork, walking stick, marble rubble, coir mats, matting and floor covering, paste, handmade safety matches, electric vehicles, marine fuel, natural cork, curtains, etc. 

Services:–All type of transport services (train, road, and air), leasing of aircrafts, tour operator services, Print media and space etc.

  • 12% Tax Slab:

Product: – Frozen meat products, butter, ghee, cheese, all type of dry fruits in packaged form, animal fat, Bhutia, nankeen, sausage, fruit juices, Ayurvedic medicines, tooth powder, umbrella, colouring, books, picture books, candles, kitchen ware, toilet articles, handbags and shopping bags of jute and cotton specified parts of sewing machine, dry fruits in packaged form, bicycles, parts of specified agricultural, forestry, harvesting or threshing machinery, spectacles frames, etc.

Services: – Movie ticket less than 100 or equal to 100 rupees, hit fund services by foremen, food/drinks at restaurants without AC/ heating or liquor license. 

  • 18% Tax Slab:

Product:-Handwash sanitizer, preserved vegetables, note books, pastries and cakes, steel products, speakers, cameras, smartphones, footwear above 1000 rupees, biscuit, school bags, printers, helmets, hair cream, shampoos, sanitary ware and part thereof, wrist watches, clocks, physical exercise equipment, perfumes, glass of all kinds and parts thereof, storage water heaters, water cooler, washing machine, concrete mixer, telescope, binoculars, fire extinguishers, power banks, digital cameras and video camera recorders, etc.

Services: – Movie tickets over 100 rupees, outdoor catering, food/drinks at restaurants with AC/heating, etc.

  • 28% Tax Slab:

Product:- Automobiles, motorcycles, dishwasher, liquid soaps, razors, wigs, false beards, ATM, vending machines, aerated water, motor cars, pianos, fax machines, monitor screen of more than 32 inches, tempered glass, aircraft for personal use etc.

Services: – 5-star hotels, race club betting, gambling, entertainment events.

Prospect of GST implementation

Businessmen, tax professionals, economists, and the Indian media have endlessly hailed the proposed shift to the new tax regime and entire community collectively believes that it will dramatically improve the ease of doing business in India and will promote start-ups to join the Made in India mission. Still, the Indian economy is driven by the service provider. GST will significantly reduce tax evasion, will ensure easy compliance in terms of eliminating the need of Waybills, C form, F-form and other Local VAT and CST Forms, and it will eventually increase the overall GDP Growth.

Both central and state government achieved a major breakthrough in its quest to bring GST and we believe that GST will eliminate current dual control of tax assesses thrashed out between the state and the Centre. The Centre and state now agree to share tax revenue in 50:50 with assesses above Rs. 1.5 Cr annual turnover and below Rs. 1.5 Cr turnover in the financial year. The revenue sharing of state and Centre will be 90:10. Hence, the state will earn maximum revenue from small businesses.

Requirement of training

Successful implementation of GST in all states of India is a big challenge whereas the Tax Commissioner and other revenue staff employed by Central and state governments will require extensive training and a skill development program. Much training is required for tax authorities to stop unnecessary penalty proceedings against businesses. If we do an analysis of the total penalty amount demanded vs. tax collection, the analysis says that 90% of the recovery order was either inappropriate or disposed of by the appellate authority at a later stage. This is one of the biggest challenges in the implementation of GST in India.

Conclusion

The GST council meeting is held regularly to improve the overall GST Rates in India for multiple goods.

Do you wish to register for GST? Or are you looking for a GST implementation advisory? Would you like to know about the GST’s impact on your industry? Please feel free to contact Enterslice, India’s leading online legal and tax advisory firm.

Read our article: ITC restrictions for availing credit in accordance with Rule 36(4) of the CGST Rules

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Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on criminal and corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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