GST Rate

Reviewed by Anjaneyulu | Updated on Aug 27, 2020

Introduction

Since the introduction of the Goods and Services Tax (GST) regime, there has been broad speculation about the GST rate slabs. The GST Council is the body which decides the rate slabs, and the GST Council will revise the list of goods and services for each rate slab periodically. The government's objective is to provide lower tax rates for basic needs, goods, and services, and higher tax rates for those that are considered luxury supplies.

How it will Change

The GST Council shall consult with the Fitment Committee on any change to the GST rate. The proposed changes to the GST rate are then discussed and finalised at the GST council meetings. The CBIC subsequently implements the changes by passing a notification on the CBIC website.

The date of implementation of the new rate is usually specified in the notification itself. Otherwise, the date of implementation would be the day the changes are published in the Central Government's official gazette.

Reasons for GST Rate Change

The Council has also changed GST rates from time to time to rationalise the GST structure. Some of the reasons for GST rate change are:

  • To correct the inverted tax structure, which is very important for businesses to run smoothly and to not face any working capital issues.

  • To reduce the price of goods, which are essential items (such as food items and basic clothing), so that everyone can afford such goods/services.

  • To bring parity in prices of goods/services, which do not vary much in quality/terms of service.

Recent Changes

The council has come up with several rate changes on a few goods/services. The following are the important rate changes in the PFY:

|Items |Before |After | | ------------ | ------------ | ------------ | |Electric Vehicles | 12% | 5% | |Caffeinated Beverages | 18% | 28% + 12% cess | |Outdoor Catering (without ITC) | 18% | 5% | |Hotels (Room Tariff of Rs 7501 or above) | 28% | 18% | |Hotels (Room Tariff from Rs 1,001 to Rs 7,500) | 18% | 12% | |Cess on Petrol and Diesel Motor Vehicles (Capacity of 10-13 passengers)| 15% | 1% & 3% respectively | |Lotteries (State-Owned) | 12% | 28% | |Mobile Phones and Specified Parts | 12% | 18% | |Aircraft MRO (Maintenance, Repair, Overhaul) Services | 18% | 5% (with full ITC) |