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

By Annapoorna


Updated on: Dec 13th, 2023


7 min read

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.

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:

Tax TypeDescription
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.

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.

Frequently Asked Questions

What are the four structures of GST?

The four-tier structure of GST is set at 0%, 5%, 12%, 18%, and 28%, offering a comprehensive framework for taxation across different sectors.

What is the future of the GST structure?

The future of the GST structure in India is uncertain, with some experts believing that it will be simplified and others advocating for a more complex system. The current GST structure has a total of 4 tax slabs including 0%, 5%, 12%, 18%, and 28%. There is a possibility that the 18% slab will be eliminated in the future, with items currently under this slab being moved to either the 12% or 28% slab. Another possibility is that the 18% and 28% slabs will be merged, creating a single higher tax slab.

Are there any potential reforms or changes expected in the GST structure in the near future?

Several potential reforms are expected in the GST structure, including rationalising tax rates, bringing more items under the GST, reducing the compliance burden, and improving the dispute resolution mechanism. The government constantly reviews the GST structure and makes necessary changes to ensure it works effectively and efficiently.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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Quick Summary

The four-tier GST tax structure in India aims to address inflation concerns by ensuring essential items like basic food remain tax-exempt. It includes tax slabs of 0%, 5%, 12%, 18%, and 28%. Understanding the structure is crucial to follow rules, lessen tax burdens, and make informed decisions. Different taxes under GST include CGST, SGST, IGST, and UTGST.

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