GST Council fixes four-tier rate
structure at 5%, 12%, 18%and 28%.
Moving on the road map to formalize the biggest reform of indirect tax, the GST council on 3rd November, 2016, has decided four-tier structure of 5%, 12%, 18% & 28%, with Zero rate for essentials and the highest for the luxury and de-merit goods that would also attract an additional cess.
The Lowest rate of 5%would be for common use items,
while there would be two standard rates of 12% and 18% under the GST regime
targeted to be initiated from 1st April, 2017.
FM, Shri Arun Jaitley said that the highest slab
will be applicable to items which are currently taxed at 30-31%(Exice duty +
vat).Luxury cars, tobacco products, pan masala and aerated drinks would also be
levied at the highest tax rate in form of additional cess, which would be used
to compensate the states for any loss of revenue during the first five years of
implementation of GST, which would be lapsable after five years..
Undoubtedly, the interest of common man has been
duly taken care of which is evident from finalization of 5% tax rate on common
use items, as against 6% proposed earlier. Further, zero rating of necessities
is also a welcome move in the interest of common man.
Considering the standard rate of GST as stated to be
12% and 18%, it is likely that GST might see significant reduction in the
prices of specified goods with corresponding reduction in production cost with
standard tax rate at 12%, 18% against 26-30% at present.
Though, FM didn’t spoke about which tax rate will
apply on services, which apparently makes clear as per GST regime at the
standard rate of 18% against 15% in total at present.
Thus,
the
government plans to roll out the new tax regime from 1st April, 2017
and will introduce a Bill in the upcoming winter session of Parliament to
complete the legislative process.
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