GST (Goods and Service Tax) is a single tax on the supply of goods and services, right from the manufacturer to the end consumer. It aims to bring the equality in the prices of different products across the country. GST has been structured in a way that essential services and food items are placed in the lower tax rates, while luxury services have been placed in the higher tax rates.
The GST council has fitted many goods and services under four GST rates of 5%, 12%, 18% and 28% under the GST Act. The GST rates for different products have been revised several times by the GST council since the inception of the GST (Goods and Services Tax).
What Exactly is GST and GST rates?
GST (Goods and Service Tax) is an indirect tax law applicable across India. GST was put into effect on 1st July 2017 in India. The main objective of this taxation system is to curb the cascading effect of other Indirect taxes, and it is applicable throughout India. GST is the one tax that is applicable all over India.
GST rate refers to the percentage rate of tax imposed on the sale of goods and services under the different GST acts. A business registered under the GST law must issue invoices with GST amounts charged on the value of goods supply.
What are the Benefits of GST?
- One of the significant benefits of GST is that it combines all the indirect taxes under a single tax structure that is simplified and uniform.
- A business with a turn over of more than five lakhs to 20 lakhs is not liable for GST. The threshold for GST taxation is 20 lakhs.
- The complete procedure for GST, right from registration to filing returns, is very easy and can be done online without any cost.
- The businesses which have turned over up to 70 lakhs can enjoy the benefits of lowered taxes by utilizing the composition scheme.
- Goods and Service Tax is a single tax charged on the supply of goods and services, right from the manufacturer to the end consumer.
- GST rates for various goods and services are divided into four slabs they are 5%, 12%, 18%, and 28% GST in India.
- GST has been structured in a way that essential services and food items are placed in the lower tax rates, while luxury services and products have been placed in the higher tax rates.
- Any business that is eligible under GST must register in the GST portal created by the Government of India. The registered companies will get a unique registration number called GSTIN.
- Every company that makes a total income of INR 20 lakhs and more in a financial year must be required to do GST registration.
Different Types of GST Rates
The GST council has fitted over 1400 goods and 500 services under four different GST slabs of 5%, 12%, 18% and 28% under the GST Act. This is aside from the tax on Gold which is kept at 3%, and rough and semi-precious stones that are placed at a special GST rate of 0.25%.
A total of 81% of all goods and services fall in the 18% tax slab. This means 7% of the items come under the tax exempted list, 14% of the items attract a 5% tax, 17% of the items come under a 12% tax, and 43% of the items come under an 18% tax slab. At the same time, there are only 19% of the items that fall under the highest slab of 28% in the new regime.
What Items are Included Under Different GST Slabs?
The following is the list of some of the products that will be a part of the respective GST slabs.
GST Slab with No Tax
There are 7% of goods and services that fall under this category. Some of the items are the regular consumption include fresh fruits and vegetables, milk, buttermilk, flour, bread, all kind of salt, fresh meat, and eggs, along with all cosmetics, printed books, newspapers, judicial papers, natural honey, and hotels with tariff below INR 1000 and so on.
GST Slab with 5% tax
There are 14% of goods and services that fall under this category. Some of the items are the cream, milk powder, branded paneer, frozen vegetables, tea, coffee, spices, pizza bread, cashew nut, cashew nut in shell, raisin, ice, fish fillet, coal, medicine, revenue stamps, fertilizers, rail and economy air tickets, and small restaurants.
GST Slab with 12% tax
There are 17% of goods and services that fall under this category. Some of the items are the butter, cheese, dry fruits, animal fat, fruit juices, namkeen, ketchup and sauces, ayurvedic medicines, indoor games, non-AC restaurants, and business class air tickets, cellphones, spoons, tooth powder, sewing machine, and so on.
GST Slab with 18% tax
There are 43% of goods and services that fall under this category. Some of the items are the biscuits, pasta, cakes and pastries, jams, preserved vegetables, ice creams, mineral water, footwear costing more than INR 500, camera, speakers, monitors, printers, electrical transformer, tissues, optical fibres, sanitary napkins, notebooks, steel products, aluminium foil, bamboo furniture, AC restaurants that serve alcohol, five start or luxury hotels, IT services, telecom services, financial services, and so on.
GST Slab with 28% tax
There are 19% of the goods and services that fall under this category. Some of the items are the cigarettes, caffeinated beverages, cars, two-wheelers, washing machines, cement, paint, air conditioners, the dishwashing machine, yachts, aircraft, aerated beverages, and so on.
Did you know?
The GST council has assigned GST rates in India to various goods and services. While some products can be purchased without any GST, there are others that fall under different slabs of GST rates.
Different Components of GST
There are main four components of GST.
- CGST (Central Goods and Services Tax): Central Goods and Services Tax is a tax levied upon the transaction amount when you buy any goods or services. The transaction amount is the value that you pay while purchasing any goods. CGST is backed by the Central Goods and Services Act, 2017.
- SGST (State Goods and Services Tax): State Goods and Services Tax is a tax levied upon the transaction amount of the goods and services, and it is backed by Section 15 of the SGST Act. This GST component is levied upon the intrastate supplies of goods and services.
- UTGST (Union Territory Goods and Services Tax): Union Territory Goods and Services Tax is an indirect tax levied and collected by the Union Territory on the supply of goods or services that take place in Union Territories. This tax is governed by the Union Territory Goods and Services Act (UTGST), 2017. This component of GST is levied upon the intrastate supply of goods and services.
- IGST (Integrated Goods and Service Tax): Integrated Goods and Service Tax is an indirect tax imposed by the Central Government for the inter-state supply of goods and services. It is applicable for only goods or services in case of import from India or export from India.
Word to Remember
GST Slab Rates: GST can reduce the overall cost of goods and services by levying a single tax across India. It also makes the taxation system transparent. GST covers nearly 1400 varieties of goods and 500 kinds of services which are primarily classified across 4 GST slab rates.
Apart from all the services and goods mentioned above, the GST rate for stock market trading and loans is 18%. GST rates on real estate in the affordable and non-affordable segments are 1% and 5%, respectively. The tax rates in GST have been changed a few times since the new tax regime was implemented in July 2017.
Frequently Asked Questions (FAQs)
The main objective of Goods and Service Tax is to simplify the taxation process.
All companies which have a turn over of INR 20 lakhs or above in a financial year will have to register under the Goods and Services Tax.
The GST rate on gold is 3% of its value. If the gold is transformed into jewellery, an additional 5% GST is levied on the manufacturing costs. So, a total of 8% of the GST rate is applied to gold jewellery.
GST rates are decided by the GST council, which has 33 members. The council includes State Finance Minister, and it is headed by the Union Finance Minister.
GST rate is applied for both human health care services and veterinary medical services. As per the current rule, there is no GST on health care services provided by the licensed medical or paramedical clinics. Also, there is no GST on health care services provided to animals or birds at authorized clinics.