The Government has finally announced the rates for the much-awaited Goods and Services Tax (GST). GST will have a 4-tier structure with rates ranging from 5% to 28%. Essentials will have the lowest rates while luxury goods will be charged the highest. It seems like a win-win for the consumers in most cases.
No Tax Items
Keeping inflation in mind, the Government has decided that items such as food grains, poultry, milk, fresh meat, curd, fish, flour, bread, cereals, salt, printed books, handloom items etc should not be taxed. So, the GST rate will be zero for these items (hurray!). Note that almost half of the items in the Consumer Price Index fall in this category.
5%, 12% and 18% Tax Items
Commonly used items or aam-aadmi essentials such as tea and coffee, will be taxed at just about 5%. This bracket also includes medicines, kerosene and frozen vegetables among others. Services such as air and rail transport will also be placed under the 5% bracket.
Items that will come under the 12% tax bracket will include cheese, Ayurvedic medicines, mobile phones, frozen meat products, sewing machines, butter etc.
The majority of items, however, will fall under the 18% tax slab. This will apply to items such as mineral water, ice cream, cameras, note books, pastries, telecom services, steel products, refined sugar, financial services and more.
Luxury items such as personal aircraft or yachts, motorbikes, automobiles etc will attract the highest tax rate of 28%. This is in addition to items such as hair shampoo, washing machines, vacuum cleaners, dishwashers, refrigerators, air conditioners, vending machines, deodorants and more. 5 star hotels and movie theaters too will come under the 28% tax slab.
How Does This Impact You?
The general consensus is that the common man will not be affected too much since most essentials and food items continue to be exempted from tax or have been placed under the 5% tax slab. In other good news, services are set to get more inexpensive in certain segments, while education and healthcare are exempted from tax.
However, a decision regarding the tax rates to be levied on cigarettes, gold and other items has been deferred to the 3rd of June.
Industry Expert Reactions
Revenue Secretary Hasmukh Adhia stated that almost 81% of all items will fall below the 18% tax rate category, while only 19% of all goods will fall within the 18% or higher tax slabs.
Finance Minister Arun Jaitley also stated that there is an overall reduction in tax on most commodities and services. He also stressed that one of the main criteria that had to be met when deciding on GST tax rates was that it should not have an inflationary impact.
He also hoped that by implementing a more efficient system of taxation, it will ultimately keep tax evasion in check resulting in higher tax buoyancy.
Additional Reading: One Tax To Bind Them All – The GST Tax
Since the new GST rates are a breath of fresh air, why not give your finances a new lease of life? You could start by investing in a Fixed Deposit, or if you are a Credit Card lover, get a Cashback Credit Card that will help you save on your shopping. Remember, every penny counts!