To address inflation concerns and ensure essential items like basic food remain tax-exempt, the GST Council implemented a four-tier GST tax structure. In this article, we'll learn about this structure, understand its importance, and explore different tax slabs under the GST structure in India.
The structure of GST in India is a framework decided by the GST Council, which consists of a four-tier system. This structure's primary purpose is to ensure that all essential goods and a few edibles are included in the lower tax bracket. At the same time, high-value goods and services are placed in the upper tax bracket. The four-tier GST tax structure includes 0%, 5%, 12%, 18%, and 28%, respectively.
Understanding the GST structure in India is key to follow the rules, lessen tax burdens, and run your business honestly and responsibly. This knowledge lets you make smart choices, dodge possible fines, and guard your financial health.
There are different taxes levied under the structure of GST in India. To help you understand what these mean, we will explain each one of them here:
Tax Type | Description |
Central GST (CGST) | Central GST or CGST is the tax incorporated by the central government. This tax is imposed on the movement of goods and services within the state. |
State GST (SGST) | State GST or SGST is the tax levied by the state government. This tax is appropriated in the state where the transaction occurs or where the goods are sold and consumed. |
Integrated GST (IGST) | For interstate supplies, there is a tax included in the GST structure in India called the integrated GST or IGST. This tax is imposed on all the goods and services between two or more states or union territories. |
Union Territory GST(UTGST) | If there is a supply of goods and services within the Indian Union Territories, which the central government governs, a tax called Union Territory GST or UTGST is imposed. |
Zero rate in GST means a nil tax rate levied on the goods and services. In other words, a zero rate is equivalent to tax exemption. The government decides the goods and services that are eligible for a zero-tax rate. Some examples include fresh fruits, bread, milk, curd. Also supplies made to SEZ developers or Special economic zones and overseas come under zero-rate tax.
A lower rate means 5% GST is applied to commodities and services. Some examples include footwear under Rs. 500, clothing under Rs. 1000, packaged food items, branded paneer, cream, skimmed milk powder, etc.
The standard rate comes into play when a 12-18% GST is applied. The standard rate of 12% includes butter, cheese, frozen meat products, ghee, animal fat, sausages, packaged dry fruits, namkeen, fruit juices, ketchup & sauces, etc. 18% GST is applied for pastries, pasta, cakes, hairdryers, panels, vacuum cleaners, wires, telecom services, IT services, etc.
A higher rate is applied when luxury items are considered. For items such as paint, washing machines, cement, automobiles, shampoo, aerated water, sunscreen, motorcycles, etc., a 28% GST is applied. Some items are under the 28% slab for which the government fixes an additional cess.