GST Tax Rate

The GST Council is all set to decide item-wise rates in May for goods and services based on the Harmonised System of Nomenclature (HSN) and Service Accounting Codes (SAC). It is expected that GST tax rates for bulk of goods will be at standard rates of 12% and 18%, essential commodities could be taxed at a lower rate of 5%, while luxury goods will be taxed at the higher rate of 28%. The industry is keenly awaiting the GST tax rate schedules for goods they manufacture/deal with, so that tax implications can be calculated.

The Kelkar Committee 21 recommended multiple tax structure restricting the structure to three ad valorem rates, in addition to the zero rate, such as

• Floor Rate for goods of basic importance (with Central rate @ 6% and States @ 4%)
• Standard Rate for supply of most goods and services (with Central rate @ 12% and States @ 8%)
• Higher Rate for luxury or demerit goods (with Central rate @ 20% and States @ 14%)

During Select Committee discussion, few States proposed to insert the words ‘not exceeding 18%’ in newly inserted Article 246A of the Constitution of India, 1949 to desist GST Council from levying GST higher than 18% to ensure GST rates are moderate, particularly small businesses. It remains the view of the Government that the rates of GST would have to be recommended by the GST Council depending on various factors such as economic conditions, revenue buoyancy, etc.  It is essential that the recommendations of the select panel are codified in some manner which will provide a legal basis for the guidance of the GST Council in fixing rates.

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