GST

Goods and Services Tax (GST) is an indirect tax used in India on the supply of goods and services. It is a comprehensive, multistage, destination based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes. Multi-staged as it is, the GST is imposed at every step in the production process, but is meant to be refunded to all parties in the various stages of production other than the final consumer and as a destination based tax, it is collected from point of consumption and not point of origin like previous taxes.

Goods and services are divided into five different tax slabs for collection of tax - 0%, 5%, 12%, 18% and 28%. However, petroleum products, alcoholic drinks, and electricity are not taxed under GST and instead are taxed separately by the individual state governments, as per the previous tax system. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies on few items like aerated drinks, luxury cars and tobacco products.Pre-GST, the statutory tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in the 18% tax range.

The tax came into effect from 1 July 2017 through the implementation of the One Hundred and First Amendment of the Constitution of India by the Indian government. The GST replaced existing multiple taxes levied by the central and state governments.

The tax rates, rules and regulations are governed by the GST Council which consists of the finance ministers of the central government and all the states. The GST is meant to replace a slew of indirect taxes with a federated tax and is therefore expected to reshape the country's 2.4 trillion dollar economy, but it's implementation has received criticism. Positive outcomes of the GST includes the travel time in interstate movement, which dropped by 20%, because of disbanding of interstate check posts.

The GST council has fitted over 1300 goods and 500 services under four tax slabs of 5%, 12%, 18% and 28% under GST. This is aside the tax on gold that is kept at 3% and rough precious and semi-precious stones that are placed at a special rate of 0.25% under GST.

A total of 81% of all the goods and services fall below or in the 18% tax slab. This means 7 % of the items come under the exempted list, 14% of the items attract a 5% tax, 17% of the items attract a 12% tax, and 43% of the items attract an 18 % tax slab, while only 19% of the items fall under the highest slab of 28% in the new regime. Below is a list of some of the products that will be a part of the respective slabs:

Exempted GST Rate Slab (No Tax)

7% goods and services fall under this category. Some of these that are of regular consumption include fresh fruits and vegetables, milk, butter milk, curd, natural honey, flour, besan, bread, all kinds of salt, jaggery, hulled cereal grains, fresh meat, fish, chicken, eggs, along with bindi, sindoor, kajal, bangles, drawing and coloring books, stamps, judicial papers, printed books, newspapers, jute and handloom, hotels and lodges with tariff below INR 1000 and so on.

5% GST Rate Slab

14% goods and services fall under this category. Some of these include apparel below INR 1000 and footwear below INR 500, packaged food items, cream, skimmed milk powder, branded paneer, frozen vegetables, coffee, tea, spices, pizza bread, rusk, sabudana, cashew nut, cashew nut in shell, raisin, ice, fish fillet, kerosene, coal, medicine, agarbatti (incense sticks), postage or revenue stamps, fertilizers, rail and economy class air tickets, small restaurants, and so on.

12% GST Rate Slab

Edibles like frozen meat products, butter, cheese, ghee, dry fruits in packaged form, animal fat, sausages, fruit juices, namkeen, ketchup & sauces, ayurvedic medicines, all diagnostic kits and reagents, cellphones, spoons, forks, tooth powder, umbrella, sewing machine, spectacles, indoor games like playing cards, chess board, carom board, ludo, apparels above INR 1000, non-AC restaurants, business class air ticket, state-run lottery, work contracts and so on attract a 12% GST. 17% of goods and services fall under this category.

18% GST Rate Slab

43% of goods and services fall under this category. Pasta, biscuits, cornflakes, pastries and cakes, preserved vegetables, jams, soups, ice cream, mayonnaise, mixed condiments and seasonings, mineral water, footwear costing more than INR 500, camera, speakers, monitors, printers, electrical transformer, optical fiber, tissues, sanitary napkins, notebooks, steel products, headgear and its parts, aluminum foil, bamboo furniture, AC restaurants that serve liquor, restaurants in five-star and luxury hotels, telecom services, IT services, branded garments and financial services and so on attract an 18% GST.

28% GST Rate Slab

19% of goods and services fall under this category. The rest of edibles like chewing gum, bidi, molasses, chocolate not containing cocoa, waffles and wafers coated with chocolate, pan masala, aerated water, personal care items like deodorants, shaving creams, after shave, hair shampoo, dye, sunscreen, paint, water heater, dishwasher, weighing machine, washing machine, vacuum cleaner, automobiles, motorcycles, 5-star hotel stays, race club betting, private lottery and movie tickets above INR 100 etc. have been clubbed together under the 28% GST slab.