GST Tax Rates

Subject: Economy

Section: Fiscal policy

The introduction of a uniform GST was a watershed moment in India since the country’s earlier regime of taxes and cesses, both at the Centre and the States, was a big barrier to free trade and economic growth and was a cesspool of corruption.
While proposing GST, the government was confident that the 28% GST slab would be phased out, except for luxury items and there would eventually be just two slabs: 5% and a standard rate between 12% and 18% (apart from exempt items).
However, GST is still a complicated tax regime with different slabs.

Problems

‘Sin’ taxes are at cross purposes with the government’s policy of generating growth and creating jobs under ‘Make in India’ as it punishes spending. Ex- Taxes on 5-star hotels.
Similarly, high taxes on air-conditioners, air conditioned restaurants, chocolates and luxury cars create an economic ripple effect downstream, in a complex web of businesses that have symbiotic relationships.

GST Rates

At an Iyengar Bakery, the GST on bread is zero, but the vegetable sandwich is in the 5% tax slab, hitting the vegetable grower directly.
The GST on buns is zero, but buns with a few raisins fall in the 5% slab.
The GST on masala peanuts, murukku and namkeen is 12%.
And the GST on cakes and chocolates is 18%.
The same lack of logic applies to taxes on wine, rum and beer, which generate large-scale employment and are the backbone of grape and sugarcane farming and the cocoa industry.
In the automobile sector, the GST on electric cars, tractors, cycles, bikes, low-end and luxury cars ranges anywhere from 5% to 50%.
Khakhra, plain chapati, or roti fall under the 5% slab, while parotas are subjected to a higher GST rate of 18% as they need to be processed or heated for further consumption.
Then there are items that are exempt from GST. Petrol, diesel, aviation turbine fuel are not under the purview of GST, but come under Central excise and State taxes.
Central excise duties and varying State taxes contribute over 50% of the retail price of petrol and diesel.
There is also anger at the Centre for riding roughshod over the States’ autonomy and disregarding the federal structure of the Constitution.