A four –tier tax structure of 5 , 12 , 18 and 28 percent with lower rates for essential items and highest rate for luxury and de-merits goods that will also attract cess , was decided by the GST Council  in its meeting on 3rd Nov. 2016 .

With a view to keeping inflation under check , essential items including food , which presently constitute roughly half of the consumer inflation basket , will be taxed at zero rate .

The lowest rate of 5% would be for common use items while there would be two standard rates of 12% and 18% under the GST regime .

Announcing the decision arrived at the first day of the two-day GST Council  meeting , Finance Minister Sri Arun Jaitley said that highest tax slab will be applicable to items which are currently taxed at 30-31 percent ( excise duty plus VAT )

Luxury cars , tobacco and aerated drinks would also be levied with an additional cess on top of the highest tax rate .

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 the States for any loss of revenue during the first five years of implementation of GST .

The cess he said , would be lapsable after 5 years . Mr. Jaitley  said that about Rs. 50,000 Crores  would be needed to compensate the States for loss of revenue from roll out of GST , which is to subsume a host of Central and States’ taxes like excise duty , service tax and VAT in the first year .

While Centre proposed to levy 4% GST on gold , a final decision was put off.

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