GST Rates Decided, 4 Slabs Ranging From 5 To 28%: 10 Developments

The rate and scope of the long-delayed tax has been agreed upon today by the powerful GST Council, which consists of Mr Jaitley and his counterparts from different states.

The four GST slabs have been set at 5%, 12%, 18% and 28% for different items or services. The brackets are steeper than the rates of 6, 12, 18 and 26% earlier proposed by the government.

To keep inflation in check, essential items including food, which at present constitute roughly half of the consumer inflation basket, will be taxed at a zero rate. The lowest rate of 5 per cent would apply to common use items.

The peak rate of 28% will apply to luxury goods. Luxury cars, tobacco products and aerated drinks will attract an additional cess on top of the highest tax rate.

The additional cess and a clean energy cess will create a revenue pool which will be used to compensate states for any loss of revenue during the first five years of the implementation of GST, Mr Jaitley said.

The Finance Minister pointed out that the average is lower than the 18% demanded by the opposition, in particular by the Congress.

Service Tax will go up from 15% to 18 %, said Revenue Secretary Hasmukh Adhia.

The tax rate agreed upon today must be now be approved by parliament, which meets from November 16 for the winter session. Parliament has to pass two bills related to GST in the winter session to be on track to roll out of the new indirect tax regime from April 1 next year.

Fitment or categorization of items for each slab will be done by officials and will then be approved by the GST council, Mr Jaitley said.

GST does away with indirect levies charged when goods cross state lines and unifies India into a single market.