The Goods & Services Tax (GST) Council has finalized a Five-rate tax structure in India, i.e. 0%, 5%, 12%, 18% and 28%, Finance Minister Arun Jaitley today announced at a press conference.
The FM said that the government has kept about 50 percent of products in the consumer basket, such as food grains, as "zero-rated". Jaitley further said that cost empowerment issue will be taken up tomorrow.
Jaitley said that items of mass consumption will be under 5 percent slab. Additional revenue from the higher slab of 28 percent will be used for items in other slabs.
White goods category, which is presently taxed at 30-31 percent level, will be under the 28 percent category. These, however, will come with riders. While the cars will be under 28 percent category, luxury cars will be taxed much higher.
The GST panel has also approved cess on tobacco, luxury products and sin items. This cess will not be additional and won't add to states or consumers burden.
Taxation on gold will be decided upon the revenue flexibility, Jaitley said.
FM further said that it is required to pay Rs 50,000 crore as compensation in the first year of GST.
The council will decide on flexibility of the compensation pool after 5 years, Jaitley said. Cess, on the other hand, will be reviewed every year.
With a view to keeping inflation under check, essential items including food, which presently constitute roughly half of the consumer inflation basket, will be taxed at zero rate.
The lowest rate of 5% would be for common use items while there would be two standard rates of 12% and 18% under the Goods and Services Tax (GST) regime targetted to be rolled out from April 1, 2017.
The secretaries will meet soon to decide upon item wise rate slabs.