New Delhi: A 4-tier GST tax structure of 5, 12, 18 and 28 per cent, with lower rates for essential items and the highest for luxury and demerits goods that would also attract an additional cess, was decided by the all-powerful GST Council on Wednesday.
With a view to keeping inflation under check, Finance Minister Arun Jaitley said the government has kept about 50 percent of products in the consumer basket, such as food grains, as "zero-rated". Also Read: GST tax structure to bring down inflation, says Arvind Subramanian
The lowest rate of 5 per cent would be for common use items while there would be two standard rates of 12 and 18 per cent under the Goods and Services Tax (GST) regime targeted to be rolled out from April 1, 2017.
The collection from this cess as well as that of the clean energy cess would create a revenue pool which would be used for compensating states for any loss of revenue during the first five years of implementation of GST.
The cess, he said, would be lapsable after five years.
The 4-tier tax structure agreed to has slight modification to the 6, 12, 18 and 26 per cent slab that were under discussion at the GST Council last month.
The structure to agreed is a compromise to accommodate demand for highest tax rate of 40 per cent by states like Kerala.
While the Centre proposed to levy a 4 per cent GST on gold, a final decision was put off, Jaitley said.
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