What You Need To Know About GST Tax Rate in 2020

Before we had the Goods and Services Tax (GST), we used to pay a “tax on tax” as goods were brought and sold through a chain of suppliers. This used to increase the final cost of products, and the effective rate of taxation was closer to 20-30 per cent.

The GST has dramatically simplified this system. It is a single tax on the supply of goods and services which takes into account the movement of products to the consumer. The purpose behind the implementation of the GST is to bring greater equality among the pricing of products.

The GST also aims to reduce the manufacturing cost of products and help to create a system where the pricing of goods and services is more uniform throughout the country.

The exact slab rates of various goods and services are subject to change over time. The Government and tax authorities are continually updating the tax rates since the system is entirely new, and experimentation is high. Let’s take a look at the various tax slabs under the new GST system.

What Are the Tax Slab Rates?

The gst rate in india has been structured carefully to allow essential goods and services to be cheaper and make “luxury” goods and services more expensive. The tax rate for essential goods and services are significantly lower than those goods and services that are considered non-essential or luxury.

Four tax slabs cover all the different kinds of goods and services available in the country. These four tax slabs are 5%, 12%, 18%, and 28%. There are over thirteen hundred different kinds of goods and over five hundred different kinds of services that have been brought under the ambit of the GST.

There are a few exceptions to this rule. The tax on the sale of gold has been kept at three per cent while rough precious and semi-precious stones have been held at a special rate of 0.25 per cent. Several goods and services have also been made exempt from GST.

Goods and Services that Are Exempt from GST 

A total of approximately seven per cent of all goods and services in the market fall under this category. Some of these goods are required for regular consumption and are essential.

Such goods include fruits and vegetables, milk, curd, buttermilk, flour, besan, different kinds of salt, meat, eggs, cereal grains, chicken, fish, jaggery, and so on.

Some of the other types of goods that are within this category include bindi, bangles, sindoor, drawing and colouring books, printed books, newspapers, judicial papers, handloom and jute.

Furthermore, you can also stay at hotels and lodges that charge a tariff of less than Rs. 1000 without paying any GST.

Goods and Services that Attract GST at 5%

A total of approximately fourteen per cent of all goods and services in the market fall under this category.

Goods that can be sold by paying a 5 per cent GST include clothes that are priced at less than Rs. 1000, shoes that are priced at less than Rs. 500, packaged food, branded paneer, cashew nut, sabudana, ice, tea, coffee, frozen vegetables, skimmed milk, kerosene, medicine, postage or revenue stamps, and pizza bread.

Other such goods are spices, railway tickets, economy class airline tickets, food sold at small restaurants, coal, and so on.

Goods and Services that Attract GST at 12%

A total of approximately seventeen per cent of all goods and services are within this category.

Some of these goods include umbrellas, forks, spoons, indoor games, ketchup and sauces, dry fruits, ghee, cheese, butter, clothes that cost more than Rs. 1000, work contracts, tooth powder, namkeen, fruit juices, ayurvedic medicine, non-AC restaurants, carrom boards, chess boards, state-run lotteries, and so on.

Goods and Services that Attract GST at 18% 

This is the most populated tax slab consisting of a total of approximately forty-three per cent of the products and services out there.

The goods that fall under this category include speakers, printers, notebooks, jams, biscuits, aluminium foil, AC restaurants that serve alcohol, footwear that costs more than Rs. 500, IT services, telecom services, cameras, monitors, pasta, pastries, jams, ice creams, mineral water, optical fibre, branded clothes, bamboo furniture, financial services, and so on.

Goods and Services that Attract GST at 28% 

Around nineteen per cent of goods and services come under this category. These goods include a washing machine, dishwasher, motorcycles, waffles and wafers coated with chocolate, chewing gum, bidi, paan masala, automobiles, race club betting, five-star hotels, deodorants, and so on.

Conclusion 

The different tax rates for different products is a way for the tax authorities to incentivize the production of essential goods and to make it easier for consumers to purchase them.

You can find out more about gst on real estate to keep yourself well-informed. If you sell products or are a service provider, you need to know the GST tax rate that applies to you.