Earlier, several taxes applied to a single product or service. This would lead to the cascading effect of the tax. The cascading effect in simple words would mean a tax on tax.
Working of GST
The basics on the topic can be accessed through gst wikipedia. GST is easy to understand as it eliminates the use of multiple taxes. It acts as an umbrella under which all taxes are brought together and combined to one.
GST is a singular tax applied to goods and services throughout the country. This single tax is applicable from the point of manufacturing to the point of consumption. It aims at eliminating multiple taxes and streamlining the taxation policies throughout the country.
The GST tax rate slabs
GST slabs are formed after careful placing of various goods and services. It aims at making essential services cheap by reducing taxes. Also, the taxes applicable to the luxury products in the gst slabs are much higher.
Almost 1300 goods and 500 services come with a certain percentage of GST. Also, some products are not included in the list- no GST applies to these products. These are known as exempted products.
The total goods and services are divided into 5 GST categories. These categories are divided based on the rate of GST applicable to them.
- Exempted from GST- 7% of the total goods and services are taken into consideration
- 5% GST Rate- 14% of the total items
- 12% GST Rate- 17% of the total items
- 18% GST Rate – 43% of the total items
- 28% GST Rate -19% of the total items
The goods and services which have a 28% tax on them are further divided into two categories:
- Without Cess
- With Cess
The products and services which come with a cess charge are tobacco, luxury cars, aerated drinks and pan masala.
Understanding the slabs
Almost 81% of the goods fall under or in the 18% GST slab rate. This is done to bring the essential products and services under a low tax slab. Also, the luxury goods have been placed under higher rates. Now let us understand the various products and services as well as which slab they fall under:
- Complete exemption from GST
The most common poultry and dairy products are exempted from the GST slab rate. Also, fresh fruits and vegetables come under this category. Other items which are exempted from GST are- Natural Honey, pulses, rice, gram flour, bread, vegetable oil, salt, etc.
Also, basic cosmetics like vermillion are exempted from taxes. Basic stationery like stamps, books and newspapers are tax-free. Expensive fabrics like silk and jute are also exempted from GST.
Various services like hotel services below Rs.1000, Education and Healthcare are also a part of this category.
- At 5% GST
Dairy items which are extracted from milk like paneer, condensed milk, cream, etc. fall under this category. Frozen vegetables and edible oils are also a part of this category. Other items which come under this category are- Sugar, Spices, Sweets, Fish Fillets, Pizza Bread, Tea, Coffee, Juices etc.
Basic fuels like LPG, Kerosene and Coal also fall under this category. Apparel below Rs.1000 and footwear below Rs.500 are a part of this category. Medical goods and textiles form a major part of this category.
Services like travelling via train or air travel in economy class come with a 5% GST charge. Also, this slab includes cab aggregators and service providers.
- At 12% GST
Expensive dairy products like ghee and cheese fall under this category. Also, dry fruits and packaged snacks come with a 12% GST. Various fruit juices, coconut water, tooth powder, notebooks, sewing machine, umbrella etc. come under this slab.
Mobile phones are also a part of this category. This category includes apparel above Rs.1000 and Ayurvedic medicines.
Business-class air tickets and non-AC hotels come under this category.
- At 18% GST
This slab covers the major chunk of goods and services. It includes products like Ice-Cream, Preserved Veggies, Processed foods like cakes and soups, Mineral Water, Branded clothes, Products on personal Hygiene, Electronics, expensive stationery, Biscuits and Handlooms. It also includes the products made from iron and steel.
Various services like telecom, IT, Financial Services, Works contract etc. come under this category. Also, the supply of drinks in an AC restaurant and cheap movie tickets up to Rs.100 fall into this category.
- At 28% GST
This slab is for luxury goods and services. Chocolates, products on personal hygiene like deodorants, face cream etc. fall under this category. Electronics and White goods are an important part of this slab.
Automobiles and Housing materials also come with a 28% rate. Services like racecourse betting and movie tickets are charged with this rate.
- Gold- 3% GST
- Semi-precious stones- 0.25%
We now know that the essentials are either exempted from tax or come with a very low tax rate. As the product quality moves to serve a high-end customer base, the slab tends to increase. The slab is designed keeping the economic diaspora of the country in mind. Starting a business is something you may want to research by using a guide like TRUiC