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The Goods and Services Tax (GST) is a comprehensive indirect tax that has replaced multiple taxes such as excise duty, service tax, and value-added tax (VAT) in India. Under the GST regime, the government has standardized tax rates across different goods and services. The GST rates in India are divided into four categories - 5%, 12%, 18%, and 28%.The GST rates are determined based on the HSN (Harmonized System of Nomenclature) code of goods and services. The HSN code is a standardized system of names and numbers that are used to classify goods and services. This classification system is used globally to ensure uniformity in the classification of goods.
Decoding the GST Rates
The 5% GST rate is applicable to essential goods such as food items, medicines, and renewable energy equipment. The 12% GST rate is applicable to items such as mobile phones, computers, and processed foods. The 18% GST rate is applicable to items such as air conditioners, televisions, and digital cameras. The highest GST rate of 28% is applicable to luxury items such as cars, tobacco products, and aerated drinks.The GST rates in India have been designed to ensure that the tax burden is shared equally among consumers, businesses, and the government. The GST has replaced the cascading effect of multiple taxes, leading to a reduction in the overall tax burden on goods and services. The standardized tax rates across different goods and services have also simplified the tax system , making it easier for businesses to comply with the tax regulations.In conclusion, the GST rates in India are an important aspect of the GST regime. The four-tiered GST rates have been designed to ensure that the tax burden is shared equitably among different goods and services. The standardized tax rates have simplified the tax system and reduced the overall tax burden on goods and services, making it easier for businesses to comply with the tax regulations.One can also use GST Finder app to check the GST rates
What is a GST Finder app?
GST Finder is a digital tool or online platform that helps businesses and individuals to search for Goods and Services Tax (GST) information related to products and services. GST is a value-added tax that is implemented in India, and it is levied on the supply of goods and services.The GST Finder tool is designed to provide information about the applicable GST rates on goods and services in India. It is a helpful tool for businesses and individuals to ensure that they are charging the correct GST rates on their products and services.To use the GST Finder tool, a user needs to enter the name or description of the product or service that they are searching for. The tool then provides information on the applicable GST rates, including the rate of tax, the type of tax (CGST, SGST, or IGST), and any exemptions or exceptions that may apply.GST Finder is particularly useful for small businesses and startups that may not have access to professional accounting services or tax experts. It helps them to comply with the GST regulations in India and avoid any penalties or fines for incorrect tax calculation or filing. Also Read: What Are The Required Documents For GST Registration?
Understanding HSN and SAC Codes for Accurate GST Classification of Goods and Services
The HSN and SAC codes are used to identify goods and services and determine their GST rates. It is important to accurately classify the product or service under the appropriate HSN or SAC code to determine the correct GST rate.
HSN System
The HSN system is a classification system for goods based on an internationally accepted standard. In India, it is used to classify goods for the purpose of levying GST (Goods and Services Tax). The HSN code consists of a series of digits that represent different categories of goods. Each digit represents a different level of classification, with the first two digits representing the chapter, the next two digits representing the heading, and so on. The HSN code is used to determine the GST rate applicable to a particular product or service.
SAC System
The SAC system is a similar classification system for services. It is used to classify services for the purpose of levying GST. The SAC code consists of a series of digits that represent different categories of services. Each digit represents a different level of classification, with the first two digits representing the major service category, the next two digits representing the sub-category, and so on. The SAC code is used to determine the GST rate applicable to a particular service.Both the HSN and SAC systems are important for the implementation of GST in India. They help to ensure that the tax is levied in a standardized and consistent manner across the country, and they make it easier for businesses to determine the applicable tax rates for their products or services. It is important for businesses to accurately classify their products or services under the appropriate HSN or SAC codes to ensure compliance with GST regulations.
Who decides the GST Rate
The Goods and Services Tax (GST) in India is decided by the GST Council, which is a constitutional body formed by the President of India. The council is chaired by the Union Finance Minister and includes the finance ministers or other tax officials from all the states of India. The Council meets regularly to discuss and decide on issues related to the GST and to make recommendations on changes to the GST law and regulations. Also Read: How does GST Work in India
Goods and Services along with their respective rates
The complete list of GST rate with the HSN / SAC code can be accessed through the website https://cbic-gst.gov.in/gst-goods-services-rates.html Below are the list of few products and their corresponding GST rates.
| Products | Rate of GST |
|
FOOD ITEMS Milk Egg Curd Lassi Honey Unpacked foodgrains and Paneer NON FOOD ITEMS Sanitary Pads Printed books Stamps Newspapers | 0% |
|
FOOD ITEMS Sugar Packed Paneer Coffee Beans Frozen vegetables Pizza Bread Domestic LPG Skimmed Milk Cashew Nuts NON FOOD ITEMS Agarbatti Plastic Waste Insulin Lifeboat Ayurvedic medicines Kerosene | 5% |
|
FOOD ITEMS Butter Ghee Processed Food Pickle Frozen meat Instant food mixes Namkeen NON FOOD ITEMS Mobile Sewing machine Tooth Powder Umbrella Wooden Frames Jewellery box Artificial yarn Photographs Paintings | 12% |
|
FOOD ITEMS Pastries Corn Flakes Preserved Vegetable Chocolate Ice Cream Mineral Water Soup NON FOOD ITEMS Mirror Hair Oil Detergents Computers Safety glass | 18% |
|
OTHER ITEMS Small Cars Durable consumer goods such as AC Luxury Items Tobacco Aircraft for personal use Ceramic Tiles | 28% |
Following changes had been recommended by the GST Council and notified by the CBIC which shall be effective from 01stJanuary 2023
| ITEM DESCRIPTION | Prior to Amendments | Post Amendments |
| Husk of pulses, along with chilka and concentrates, chuni or churi, and khanda used as cattle feed | 5% | NIL |
| Ethyl alcohol sold to refineries to blend it with the motor spirit or petrol | 18% | 5% |
| Scale of Mentha arvensis, similar to Mentha oil | No RCM | UNDER RCM |
Why does GST rate increase or decrease?
GST (Goods and Services Tax) rates can increase or decrease due to a variety of reasons, but the most common factors that impact GST rates are:
- Economic conditions: The GST rates can be impacted by the overall economic conditions in the country. For example, if the economy is growing and there is high demand for goods and services, the GST rates may be increased to curb inflation. On the other hand, if the economy is struggling and there is low demand, the GST rates may be decreased to encourage spending and boost economic growth.
- Government Policies: The government can increase or decrease the GST rates to achieve its policy objectives. For instance, if the government wants to promote the use of environmentally-friendly products, it may reduce the GST rates for such products. Similarly, if the government wants to discourage the consumption of certain products, it may increase the GST rates for those products.
- Industry demands: The GST rates can also be influenced by the demands of specific industries. For example, if a particular industry is facing a tough time due to high taxes, it may lobby the government to reduce the GST rates. Conversely, if an industry is doing well and can afford to pay higher taxes, the government may increase the GST rates for that industry.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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