Structure of GST in India: Four-Tier GST Tax Structure Breakdown

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. 

What is the structure of GST 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.

Latest Updates

55th GST Council Meeting

1. The GST Council in its upcoming meeting is expected to address several key issues. From merging tax slabs to simplify the existing GST structure to introducing another tax rate of 35%, the meeting is a must to watch.
2. Moreover, one can expect decrease in GST rates for essential items and an increase for luxury goods.

Importance of understanding GST structure

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.

Structure of GST

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:

1. Introduction to zero rate in GST

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.

2. Lower rate (5%)

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. 

3. Standard rate (12-18%)

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. 

4. When will a higher rate (18% and 28%) of GST apply

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.