A comprehensive guide on GST Tax Rates in India

What is GST?

Goods and Services Tax (GST) is the most discussed tax reform that came into effect on 1st July 2017 in India. It is an indirect tax that has presumed all the other prevailing Central & State level taxes in India. This reform helps to bring uniformity in taxes across the country.

The goods and services tax is a value – added tax levied on most goods and services sold for domestic consumption.

The goods and services tax is paid by consumers, but it is remitted to the government by the businesses selling the goods and services.

What is GST Tax Rates?

GST rates and other provisions related to it are decided by the GST Council, which is comprised of 33 members, including Finance Ministers of the state. The Council meeting is headed by the Union Finance Minister. GST has been structured in a way that essential services and food items are placed in the lower tax brackets, while luxury services and products are placed in the higher tax brackets.

The GST rate in India for various goods and services is divided under major 4 slabs –

5% GST
12% GST
18% GST
28% GST

However, some products do not fall in any of the above-listed slabs and are taxed at a special rate like 0% GST, 0.25% GST, 1.5% GST, 3% GST, 28% GST + 12% Cess, etc. to categorize the goods and services as per their need. As per the provisions of GST law, no products or services can be taxed at a rate of more than 40%.

MAJOR GST SLABS for the F.Y. 2019-20 covering Goods & Services

5% GST Rate on Goods

Commonly used household necessity goods, medicines, and other life-saving drugs fall under this category such as sugar, oil, spices, coffee, Insulin, human blood vaccines, etc.

5% GST Rate on Services

Transport services, Printing services, Restaurant Service falls under this category such as rental cab services, railways, airways, newspapers, magazines, including room services with a tariff less than Rs. 7,500, services of special flights for pilgrims, and so on.

12% GST Rate on Goods

Regularly used Communication and technology-based devices and processed foods fall under this category such as Laptops, cell phones, and processed food items like frozen meat, fruit juices, butter, and cheese.

12% GST Rate on Services

Restaurant, travel, and entertainment services fall under this slab such as non-AC restaurants, business class air ticket, state-run lottery, movie ticket below Rs 100, work contracts, and so on.

18% GST Rate on Goods

Basic household items, Capital goods, popular goods, personal care, and apparel falls under this category like toothpaste and hair oil, washing machine, furniture, mobile phone, scent sprays, leather clothing, etc.

Some edibles like pasta, pastries, ice-cream, mineral water, etc. are also covered under this slab.

18% GST Rate on Services

Services related to Consultancy services, Industrial intermediaries, restaurant, and entertainment services, such as C.A, doctor, Outdoor Catering, IT / Telecom services, restaurants within hotels whose tariffs are above Rs. 7,500, movie tickets above Rs. 100 are majorly covered under this tax slab.

*Before GST, there was Service Tax and was charged at the rate of 15% which has now increased to 18% under GST.

*GST on home /personal /business loans and advances on processing charges and all other charges paid to bank apart from loan repayment and interest payment are included under 18% slab rate.

28% GST Rate on Goods

Special category of goods – edibles, luxury, kitchen, and washroom items fall under this slab such as chocolates, deodorants, refrigerators, AC, dishwashers, water heaters, motor vehicles, etc. have been clubbed together under the 28% GST slab.

28% GST Rate on Services

Luxury services fall under this slab such as service related to 5-star hotel services, amusement park, racing, betting in casinos, and hotel tariff above Rs. 7,500.

SPECIAL GST RATES for various Goods & Services

0% GST Rate on Goods

Essential and regular consumer goods fall under this category like fresh fruits, meat, fish and vegetables, milk, etc.

0% GST Rate on Services

Essential Services are included under this slab such as hotels and lodges with tariff below Rs. 1,000, IMM course books for kids, bank charges on the savings account, and so on.

0.25% GST Rate on Services

It is a special rate levied on services related to semi-precious stones-cut and polished.

1.50% GST Rate on Services

It’s a special rate levied on Diamond Job work.

3% GST Rate on Goods

It’s a special rate levied on Gold

28% GST with Cess 12% Rate on Goods

Luxury car, tobacco, aerated goods, pan masala, caffeinated Beverages are kept under this slab.

Key points you must have to know about GST rates

Difference between NIL rated and Exempted goods and services – The basic difference between nil rated and exempt supply is that the tariff is higher than 0% in the case of exempt supply. But there is no tax payable due to exemption notification. Whereas in the case of NIL rated supply, the tariff is at the NIL rate so there is no tax without the exemption notification.
GST on Real Estate – From 1 April 2019, GST is applicable at the rate of 1% on affordable house properties and 5% on non-affordable house properties. The GST rates vary from 5% to 28% for various building materials used for construction. However, no GST is levied when you purchase a ready to move in property.
GST on Gold -The current rate of GST on gold items such as gold jewelry is 3%. Although 5% of GST is charged as the making charges of gold jewelry when the manufacturing of the jewelry is outsourced to a job worker.
GST is levied only on packaged food, processed and semi-processed foods which are from 5% to 18%. No GST is levied on fresh food.
Electricity, Liquor for human consumption, and Petroleum products which Include Petrol, diesel, Anti Turbine Fuel, etc. are not yet included in GST law and are still taxable as per the provisions of VAT and Excise.

The Indian Economy has shown a tremendous change with the launch of GST. The implementation of GST has not only help to bring down the prices of Goods & Services whereas it has simplified the tax calculation by its single paying tax structure.

By- Sofiya Syed, Chartered Accountant