Current Affairs: GST Council Sets, Rates and Tax SlabsAnisha Mukhija
A four-tier Goods & Services tax structure was decided by the GST Council on November 3rd, 2016.
The structure consists of 4 tax slabs:
- 5 percent (for items of common use)
- 12 percent (standard rate)
- 18 percent (standard rate)
- 28 percent (for luxury cars, tobacco, aerated drinks, etc.)
Thus, the lower tax rates would be applicable to basic and essential items.
The higher rates would be applicable to all the luxury items and demerit goods. These goods would also come with an additional cess on them. This cess could then be used to compensate for any losses in the first five years of the implementation of GST.
A lot of items, like soaps & detergents, which are currently priced at high rates, could be brought down to 18%.
From the basket of the consumer price index, 50% of it will be charged at zero rates. This will be done to control inflation.
Post these announcements, some more propositions/modifications and bills will be passed in the upcoming months. Further models like IGST and bill regarding CGST & SGST, will be passed, after mutual agreement.
The GST bill will be implemented from April 1, 2017.
Given below are the definitions & abbreviations of some important terms that were used in this article.
Slabs: As per Indian tax laws, income taxes vary on the basis of income. The government has created different income tax slabs to facilitate this differentiation.
Income tax slabs refer to different levels of income and their different tax liabilities. Income tax slabs are applicable for nearly all types of taxpayers such as individuals, Hindu Undivided Families (HUFs), Association of Persons (AOPs), Body of Individuals (BOIs), and co-operative societies.
Demerit Goods: In economics, a demerit good is a good or service whose consumption is considered unhealthy, degrading, or otherwise socially undesirable due to the perceived negative effects on the consumers themselves. It is over-consumed if left to market forces.
Basket of Goods: Basket of goods refers to a relatively fixed set of consumer products and services valued on an annual basis and used to track inflation in a specific market or country. The goods in the basket are often adjusted periodically to account for changes in consumer habits. The basket of goods is used primarily to calculate the Consumer Price Index.
Consumer Price Index: A consumer price index (CPI) measures changes in the price level of a market basket of consumer goods and services purchased by households. The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.
Inflation: a general increase in prices and fall in the purchasing value of money.
GST: Goods & Service Tax
CGST: Central Goods & Service Tax
SGST: State Goods & Service Tax