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Government finalizes four-tier GST tax structure

The powerful Goods and Services Tax (GST) Council, headed by Union Finance Minister Arun Jaitley, has finalized a four-tier tax structure of 5, 12, 18 and 28 percent that aims to lower tax incidence on most goods and keep out essential items. According to Arun Jaitley, the two items that were discussed by the GST Council were rate structure & compensation formula and cross empowerment.

Finance Minister said that under the new rate structure, the aam aadmi items will be taxed at a rate of 5 percent and half of the items that come under the consumer price index basket like food-grains, would not be taxed at all. Further he said that 5 percent duty will be for items of mass consumption, standard rates of 12 percent and 18 percent will be applicable on other items. He also said that the GST cess will not put additional burden on consumers. The highest tax slab of 28 percent will be applicable to items which are currently taxed at 30-31percent (excise duty + VAT). Luxury cars, tobacco and aerated drinks would also be levied with an additional cess on top of the highest tax rate.

Jaitley also added that all GST decisions were taken by consensus except for the 28 percent slab. GST rates for gold will be decided after seeing revenue implications. Further he will seek parliamentary approval for bills later this month that would set the rate and scope of the GST. State assemblies must also to approve similar bills for the tax to enter force as planned next April 1. Commenting on the rate structure, Chief Economic Adviser Arvind Subramanian has said that it has been designed in a way that will protect people at the lower-end and GST rate structure will be more than revenue neutral.

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