GST Rates Current Affairs
The GST Council headed by finance Minister Arun Jaitley has finalised tax rates and has approved all the seven rules for the GST regime that is scheduled to be implemented from July 1. The remaining two rules of the GST pertaining to transition and return is under the examination of the legal committee. In total, the council has fixed the rates of 1211 items. It will decide rates of some other items and services in the coming days.
- Out of 1211 items, 81% of the items will attract tax of 18% or less. Only the remaining 19% of items will attract a highest rate of 28%
- Household items like Sugar, Tea, Coffee and edible oil will attract 5% levy. Cereals and milk will be exempted from the tax.
- Manufactured goods will attract 18% levy.
- Luxury cars will attract 28% GST in addition to a cess of 15%. Small petrol cars will attract 28% GST plus a 1% cess, and diesel cars will be taxed at 28% plus 3% cess.
- Capital goods, a key asset for the manufacturing sector, will be taxed at 28%.
- Aerated drinks will fall under the 28% tax bracket.
The GST Council has not increased the overall tax in any of the 1211 items but have reduced tax on many items. For example, Soap, which is now taxed at the rate of 22-24%, will be taxed at 18%.
The present tax incidence in excess of 28% on luxury items will be treated as cess and will be deposited in the corpus for compensating states if they suffer any revenue loss.
Food items are expected to become cheaper. Daily use items like hair oil, toothpaste, and soap are kept in the 18% tax slab instead of 28%.
The cost of energy generation is expected to become less as tax incidence on coal has been reduced from 11% to 5%.
GST regime is expected to unify the whole of the country into a common market eliminating both Central and State levies. Also, GST is expected to increase state and federal tax revenues, ease inflation and boost economic growth by 1-2% points in the medium term.
Lok Sabha has passed four Bills relating to the implementation of the Goods and Services Tax (GST). It paves way for implementing a new, consolidated indirect tax regime from the proposed date of July 1, 2017.
The four bills passed were Central GST Bill, Integrated GST Bill, GST Compensation Bill, and the Union Territory GST Bill, 2017. These Bills were passed as Money Bills, thus eliminates the role of Rajya Sabha.
- The tax rates under GST regime will be based on the recommendation GST Council. Council has two-thirds voting by States and one-third by Centre.
- The GST laws passed by Parliament will not apply to Jammu and Kashmir, as it will have to legislate its own law and integrate with the GST regime.
- There will be no single rate under GST as it will be not possible and it will be highly regressive. So The GST Council has recommended a four-tier tax structure 5, 12, 18 and 28%.
- On top of the highest slab (28%), a cess will be imposed on luxury and demerit goods to compensate the states for revenue loss for five years.
- Essential food articles will not taxed and those will continue to be zero rated under the GST. All other commodities will be fitted into the nearest tax bracket.
The fifth GST legislation, the State GST Bill, needs to be separately passed by the respective legislative assemblies of each of the States and Union Territories with legislature.
GST is touted as the biggest taxation reform since independence. It will subsume indirect taxes such as central excise, service tax, VAT and other local levies to create an uniform market. GST regime is expected to boost GDP growth by about 2% and check tax evasion. It will make commodities “slightly cheaper” and exports more competitive. It will also improve tax compliance and ensure that assessees get input credit of the taxes paid