The GST Council backed by Finance Minister Arun Jaitley has finalized a four-slab tax structure of varied taxes from 5 percent, 12 percent, 18 percent to 28 percent depending on the goods and services involved.
Two additional taxes – estimated demerit rate of 40 percent on aerated drinks, pan masala and luxury cars and a second 65 percent rate for tobacco products – will be imposed as cess upon a 28 percent rate. The cess along with the clean energy cess is expected to be used to compensate states for loss of revenue for the first five years of GST implementation as promised by the government.
Essential commodities will be taxed at zero percent; goods of common use are expected to fall under the 5 percent tax slab while high-end products will attract a 28 percent tax and above. Most services are expected to fall under the 12 percent and 18 percent bracket.
Besides the arduous task of implementing this complex tax structure from April 2017 onwards, business houses will have to deal with certain important issues before GST becomes a reality.