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GST to have four slabs

The Goods and Services Tax (GST) will have a four-slab tax structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent. The lower rates are for essential items and the highest for luxury goods. Both the Center and the states will have powers to scrutinise and audit all assessees.

The highest tax slab of 28 per cent will be applicable to items which are currently taxed at 30 to 31 per cent (excise duty plus VAT). However, a lot of the items in this category which are mass consumed by middle and lower-middle classes, like soaps and detergents, could be brought under the 18 per cent slab.

Luxury cars, tobacco and aerated drinks would also be levied with an additional cess on top of the highest tax rate. The idea would be to keep the total tax plus cess similar to the levy charged on these items now.

The collection from this cess as well as that of the clean energy cess would create a revenue pool which would be used for compensating states for any loss of revenue during the first five years of implementation of GST. The cess would lapse after five years.

 
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