GST rates will spare common goods : What's in store for the aam aadmi

The rate and scope of the long-delayed tax, which would transform India's economy into a single market, has been agreed upon today by the GST Council.

The tax rates would range from 5 to 28 percent, with 12 percent and 18 percent as standard rates, - steeper than the rates of 6, 12, 18 and 26 percent earlier proposed by the government.

The fifth rate for gold and precious metals, which was earlier proposed at 4%, will be decided later but is likely to be lower. 

Here are the key highlights

Common man's dal-chawal untouched:Items that are used by the aam aadmi, and qualify for mass consumption, will be taxed at 5%. Around 50% of the items that form part of the consumer price index basket (such as daily food consumption items) will not be taxed at all under GST.

Some products such as soaps, oil and shaving sticks, which would have gone into the 28% bracket, will now move to the 18% slab.

The peak rate of 28% will apply to luxury goods: The finance minister said highest tax slab of 28 percent will be applicable to items which are currently taxed at 30-31 per cent (excise duty plus VAT). However, a lot of the items in this category which are mass consumed by middle and lower-middle classes, like soaps and detergents, could be brought under the 18 per cent slab.
 

Additional cess: Luxury cars, tobacco products and aerated drinks will attract an additional cess on top of the highest tax rate.

Additional revenue from the highest tax slab will be used to keep essential use items at 5% and to help transfer common items to 18%. The cess on luxury and sin goods, and the clean energy cess on coal, should help the Centre mop up around Rs 50,000 crore to compensate states for any revenue loss due to GST.

Services will get more expensive: Revenue Secretary has indicated that the rate of tax on services is likely to be 18 percent. It definitely makes services more expensive as the current rate is 15 percent. 

While the lists are yet to be rolled out by the GST Council, all essential commodities and services, including education and health care should feature in the list of special concessional rate of 5% (if not zero rated).