- GST was introduced to simplify business by creating a single tax structure across the country.
- Currently there are five GST slabs for goods and four different slabs for services.
- GST slabs are structured so that essential items are placed at the lowest tax bracket.
Until recently, every purchase had a ‘tax on tax’ throughout the value or supply chain. This taxation structure increased as high as 25 to 30% over time. Therefore, taxes also increased the end cost of goods for the customer.
GST gets rid of uncertain taxes and makes the prices of products similar across the country.
Introducing GST slabs streamlined costs and ensured a cooperative marketplace where goods and services costs have become more or less same across the country.
GST slabs on goods
At the moment, five different GST slabs are applied on goods. These are:
- 0.25% on cut and semi-polished stones
- 5% on household essentials
- 12% on items such as computers
- 18% on items such as hair oil
- and 28% on items such as aerated beverages
[See the full list of GST rates for goods here.]
GST slabs on services
Currently, there are four different GST slabs applied on services. They are:
- 5% on services such as tour operating agencies
- 12% on services such as air travel
- 18% on services such as outdoor catering
- and 28% on services such as gambling
[See the full list of GST rates for services here.]
Who decides GST rates?
Currently, the GST Council decides GST rates. The GST Council consists of 33 members, including state finance ministers. The union finance minister heads this council.
Understanding GST rates
GST slabs are structured so that essential items and services are placed at the lowest tax bracket. On the other hand, luxury products and services are placed in the high tax bracket.
According to the GST Council, over 1,300 goods and 500 services fall under four tax slabs of 5%, 12%, 18% and 28% GST slabs. The breakdown is as follows:
- 7% of items fall under the exempted list
- 14% attract a 5% tax
- 17% items draw a 12% tax
- 43% of items draw 18% GST slab rates
- 19% of the items fall under the highest slab of 28%
Exempted goods and services
Seven per cent of goods and services do not have a tax rate, i.e., they are exempted from GST.
Therefore, as a small business owner, it is important to know that you will not have to pay GST on:
- Fresh produce such as fruits and vegetables
- Milk, buttermilk, curds
- All kinds of salt and jaggery
- Fresh meat, fish, chicken, eggs
- Bindi, sindoor, kajal, bangles
- Colouring and drawing books
- Printed books
- Hotels and lodges with tariff rates below ₹1,000
- Jute and handloom
- Judicial papers and so on
5% GST slab
Fourteen per cent of overall goods and items come under this category. Therefore, if you are a small business owner who deals in this kind of product, you may want to know that 5% GST rates are applied to:
- Cream, skimmed milk powder, branded paneer
- Coffee, tea
- Frozen vegetables
- Clothes under ₹1,000 and footwear below ₹500
- Packaged food items
- Pizza bread, rusk
- Cashew nut and cashew nut in shell
- Revenue or postage stamps
- Rail and economy class air tickets
- Small restaurants
- Fish fillets etc.
12% GST slab
Over 17% of goods and services fall under the 12% GST slab. If you are a grocery owner or a small business owner, it is important to know that 12% GST rates will fall on:
- Dry fruits in packaged form
- Butter, cheese and ghee
- Fruit juices, ketchup and sauces
- Indoor game items such as carrom board, ludo, chess boards, playing cards
- Mobile phones
- Diagnostic kits
- Sewing machines
- Clothing items above ₹1,000
- Business-class air ticket
- Work contracts
- State-run lottery
- Spoons and forks and so on
18% GST slab
Over 43% of goods and services fall under the 18% GST slab. The 18% GST rate is applied on:
- Pastries and cakes
- Preserve vegetables, jams and soups
- Ice cream
- Mayonnaise, mixed condiments and seasonings
- Pasta, biscuits and cornflakes
- Speakers, printers and monitors
- Footwear costing more than ₹500
- Electrical transformers, optical fibres and telecom services
- Sanitary napkins and tissues
- Aluminium foil
- Bamboo furniture
- Restaurants in five-star luxury properties
- AC restaurants that serve alcoholic beverages
- IT services
- Branded garments
- Financial services and so on
28% GST slab
This category comprises 19% of goods and services. As a small business owner, you may want to know the list of items in the 28% GST rate category. They are:
- Chewing gum, pan masala and bidi
- Chocolate not containing cocoa
- Waffles and wafers coated with chocolate
- Aerated water
- Personal care items such as sunscreens, shaving creams, aftershave, hair dye products, deodorants and hair shampoos
- Paints, water heaters and dishwashers
- Weighing machines and washing machines
- Vacuum cleaners
- Five-star hotel accommodation
- Private lottery
- Movie tickets above ₹100 and so on
Products likely to come under GST
The Indian government is considering adding new items under the GST’s elaborate system.
According to the Finance Minister, the government is likely to include specific products under GST while at the same time reducing tax rates on other products.
Some products that are likely to fall under GST include:
- Petroleum items such as diesel and petrol
- Real estate
- Electricity and others
The importance of GST on Indian economy
Introducing GST has helped bring an appropriate price structure for goods and services under one single tax.
Some significant benefits of implementing GST that have impacted Indian businesses are:
- Less tax burden on the consumer: As a small business owner, you aim to ensure that your customers are happy. With the GST slabs rates, prices of goods and services have helped the customer experience fewer tax burdens.
- Uniform, simple tax structure: The introduction of GST, a single taxation system, has simplified tax calculation to a large extent.
- One single tax regime: In the past, multiple taxes would have to be paid at every supply stage—thus greatly confusing taxpayers. However, with GST slabs, the uniform tax system has helped businesses and enabled easy tax collection.
Now that you know more about GST, you will be better able to apply the tax rates to your business. You will also be able to understand the GST rates that apply to the products and services you sell and build the right strategy to boost your business.
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