The Goods and Services Tax (GST) has been a gamechanger in the India tax system. A single, unified tax, GST does away with multiple indirect taxes. The GST structure as such is designed such that goods and services are taxed accordingly. It follows a 4 tier GST tax structure, where essential items are tax-free (NIL or 0% tax), while luxury items incur premium tax (28%). Here, let’s take a look at the GST rate structure in India to understand how and why commodities are taxed in a certain way.

GST structure in India

Before we delve into details of the GST rate structure of specific goods and services, here’s an overview of the GST structure in India as of 2024.

For the full GST rates list, visit: //cbic-gst.gov.in/gst-goods-services-rates.html

Also read: GST on steel bars – Tax on iron, TMT bars and more

What is the GST rate structure?

The GST Council in India has designed a GST framework that categorises various goods and services and taxes them accordingly. Essential, daily use items are taxed less or are included under GST exempted items, while luxury items and high-value goods are taxed higher. Over 1300 goods and 500 services fall under this GST rate structure that makes tax collections simpler and uniform.

Currently, there is a 4 tier GST tax structure: 5%, 12%, 18% and 28%

There is also the NIL or 0% rate of tax for specific essential items and food grains.

Gold is taxed at 3%, whereas precious and semi-precious stones are taxed at 0.25%.

What is the 4 structure of GST?

As explained in the previous section, the GST regime in India has multi-tier tax structures to accommodate different goods and services. There are essentially 4 tax structures for GST: 5%, 12%, 18% and 28%

Nearly, 81% of all goods and services are taxed at or below 18% GST, with only 19% of goods being taxed at 28%.

Note: The GST structure refers to the tax slabs or tax rates and should not be confused with the different types of GST in India which refers to CGST, IGST, and SGST/UTGST.

How many structures are there in GST?

GST follows a multi-tier tax structures to ensure accommodation of a wide variety of goods and services. By and large, in India, the GST rate structure follows a 4 tier tax structure where GST on goods are taxed at 5%, 12%, 18% and 28% accordingly.

However, there are some essential items that are fall under the 0% GST tax structure (NIL), in which case, the GST structure is often referred to as the 5 tier GST structure: 0% (NIL), 5%, 12%, 18% and 28%

In the next section we will take a look at the individual GST tax structures and slabs.

Also read: GST on transport – Learn about GST slabs for transport systems

0% GST tax slab – Understanding the NIL tax category

There are several items categorised under the NIL or zero percentage tax bracket under the GST regime, to support daily sustainability and economic accessibility. These include (but are not limited to) food grains, healthcare services and educational materials, vital for everyday living.

The exemption maintains affordability of essential goods, making it available to all without financial strain. It promotes welfare and sustainability and denotes the government’s commitment to ensure that basic needs of people are met.

5% GST rate structure – Products and Services

We next take a look at the 5% tax slab that covers basic goods and services that are above the essential items. Items such as apparel under a certain value, packaged food items etc. fall under this bracket. In recent times, this category has been adjusted to include more items, reflecting changing consumer needs and market. This category is designed to balance affordability and revenue generation for the government.

This GST tax slab is designed such that it contributes to revenue generation while ensuring that basic goods are still affordable. It also ensures tax policies are adjusted based on public necessity and economic conditions.

12% GST tax bracket – Key insights

The 12% tax rate represents a middle ground in the GST structure. It consists of items that are more than basic, but not considered high-value and essential for maintaining a basic to average lifestyle and regular needs. The items in this category are significant in number and variety, reflecting the changes in India’s growing economy.

As can be understood, these items enhance the quality of life but do not qualify as luxury items.

18% slab of GST structure – The majority items

The 18% slab plays a significant role in the GST system. More than 40% of all goods and services are included in this tax slab. It is often considered the standard rate for several goods and services that are beyond basic and essential items and include electronic items, processed food, among other. This slab has also undergone changes over the years, with items being added, moved up or down the GST rate structure to accommodate changes in market and economic conditions.

This GST rate bracket includes a wide range of goods and services that are important in modern day living and is a key source of revenue generation for the GST system.

Also read: Impact of GST on logistics – How GST benefits the logistics sector

28% GST tax structure – Luxury goods and services

The slab for 28% tax is reserved for high-end goods and services and luxury items. It’s the highest tax bracket in the GST structure in India and include goods that are desirable (e.g., high end cars, consumer electronics, etc.) and also whose consumption the government aims to deter (e.g., tobacco, aerated drinks, etc.).

This tax slab acts as both a revenue and regulatory tool and targets high-end products and goods that are considered unhealthy for consumption.

What is GST features and structure?

Now that we have understood the various GST rate structures and tax slabs, let’s understand the key features of the GST structure.

• GST is a multi-stage tax system that categories a wide range of goods and services and taxes them based on their nature and essentiality
• It enhances compliance, boosts transparency, and fosters an inclusive economy
• The unified GST tax structure consolidates central and state taxes into one and thereby reduces complexities
• GST structure is designed such that businesses can claim ITC paid on purchases of goods for production or resale, thereby preventing the cascading effect of taxes (Also read: GSTR 3B – GST returns form for ITC and taxes)
• GST registration is required for all eligible businesses (Also read: How to register on GST portal?)
• GST is a destination based tax that helps to redistribute tax revenue towards consumption-oriented states

Author: Sohini Banerjee

Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.