Goods and Services Tax (GST), a historic tax reform, comes into effect today. The GST regime would subsume various taxes and there would be a single tax law and four tax rates—5%, 12%, 18% and 28%—that would be charged by the Centre and the states. The government has set a 3% tax rate for gold jewellery, while a majority of goods and services will be taxed at a rate of 18%.
Also, a number of goods and services have been exempted from the tax structure. Tax rates under GST have been largely kept at existing levels for most sectors, barring a few. While fast moving consumer goods like soaps, tooth paste, hair oil and SUVs will cost less; luxury hotels, aerated drinks, tractors will attract higher tax. The threshold limit for exemption from levy of GST is Rs 20 lakh for the states except for the special category north-eastern states, where it is Rs 10 lakh.
Till date, over 66 lakh taxpayers have activated their account at the GST portal.
|GST rate structure||GOODS||SERVICES|
|0%||Products such as food grains, fresh vegetable, milk, fresh meat, chicken, eggs, newspapers.||Hotels & lodges with tariff below Rs1000|
|Gold & Precious metals- 3%||–||–|
|Mass consumption goods- 5%||Fish fillet, apparel below Rs1000, packaged food, footwear below Rs500, cream, skimmed milk powder||Transport services (railways & air), small restaurants|
|Standard rate- 12%||Frozen meat products, butter, ghee, animal fat, sausage, fruit juices, diagnostic kits||State-run lotteries, non-AC hotels, business class air-tickets|
|Standard rate- 18%||Biscuits, flavoured refined sugar, pasta, corn flakes, pastries & cakes, preserved vegetables||AC hotels which serve liquor, telecom services, IT services, financial services|
|Highest rate- 28%||Chewing gum, molasses, chocolate coated wafers, paan masala, aerated water||Hotels with room tariffs above Rs7500, 5-star hotels, race club betting|
A cess would be levied on certain goods such as luxury cars, aerated drinks, pan masala and tobacco products, over and above the GST rate of 28% to recover amount for compensation to the states. In fact, GST will bring in transparency and encourage investments in organised sectors, helping the economy gather growth momentum.
Since the liability to pay GST on purchase of goods from unregistered dealer is on the receiver (registered dealer) of the goods/services, tax compliance will improve benefitting organised players.