Arun Jaitley, Finance minister told, The Good and Service tax (GST) will range from 5 to 28 percent in a four bracket structure.
A Much delayed tax has been finally agreed upon today in GST council consisting of counterparts from different states. The four Goods and Service Tax slabs/brackets have been set at 5%, 12%, 18% and 28%.
Essential items including food will be taxed at a zero rate. The lowest rate of 5 percent would apply to common use items. This is done to keep a check on inflation.
On the other hand, Peak rate of 28 percent would be applied to luxury goods which may include luxury cars, tobacco products, and aerated drinks. Aerated drinks will also include additional cess on top of the highest tax rate.
Service tax will go up from 15 to 18 percent.
Mr. Jaitley said the additional cess and a clean energy cess will create a revenue pool which will be used to compensate states for any loss of revenue during the first five years of the implementation of this tax. Fitment or categorization of items for each slab will be done by officials and will then be approved by the council.
The tax rate agreed today must be approved by parliament. Parliament has to pass two bills related to GST.