New Delhi: The much awaited GST structure was announced today by Finance Minister Arun Jaitley. The GST Council has proposed a four tier tax structure of 5, 12, 18 and 28 % in which essential items will come under lower rates and the highest tax rate would be applicable on luxury items and goods with demerits. Many items in the Consumer Price Index (CPI), specially food items that form about 50 % of this basket, will be taxed at zero rate. Jaitely announced the tax structure at the inaugural evening of the two day GST Council meeting.
Finance minister Arun Jaitley said,“Zero-tax rate to apply to 50 per cent of items in the Consumer Price Index basket, including grains used by the common man. Five per cent duty will be levied on items of mass consumption used by common people. Two standard rates of 12 and 18 per cent will be there in GST. Items taxed at 30-31 per cent [excise plus VAT] will be taxed at 28 per cent. Additional revenue from highest tax slab to be used to keep essential use items at 5 per cent and transferring common use items to 18 per cent.”
This tax structure could check the inflation in food, particularly the pulses that touched sky high rates since last year. While high end cars and other luxury items could be costlier, tobacco, aerated drinks and products with demerits could also become more expensive after coming under the highest tax slab and an additional cess that would be collected along with a clean energy cess to compensate for any revenue losses of states during the first five years of the GST implementation.
Jaitley also said that Rs. 50,000 crore is required to be paid to States for loss of revenue in the first year of GST rollout.
“The proposed tax structure ‘s impact on Odisha will only be evident once the implementation begins in April, 2017,” said Rajiv Sahoo, well known Chartered Accountant who has been on the boards of several nationalised banks and PSUs.