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GST Center

What Is a GST Tax Slab?

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The new GST rules sort goods and services into a variety of different tax slabs. A tax slab refers to a group of goods and services that are taxed at a certain rate, and under the new system, the tax slabs are 5, 12, 18, and 28%. As a general rule of thumb, essential goods and services fall into the lower tax slabs, and in some cases, they are even exempt.

Luxury products and services, in contrast, are taxed at higher rates.

Exempt From GST

Many essential goods aren’t taxed at all. That includes fresh meat, eggs, bread, fruit, honey, and salt, but because your mind needs fuel as well, it also includes newspapers and children’s books. Need human hair or clay idols? Luckily, those items, as well as a handful of others, are also tax

exempt. In terms of services, healthcare, education, and hotels with tariffs below ₹1,000 are all GST exempt.

The 5% Tax Slab

While most fresh foods tend to be tax exempt, many packaged and processed foods such as frozen vegetables, powdered milk, and coffee fall into the 5% tax slab.

Cashew nuts, prayer beads, fibre products, coal, and a variety of other goods also fall into this slab. Services with 5% GST include many restaurants, air transport, and railways.

The 12% Tax Slab

Goods in the 12% slab include spoons, fish knives, bells, gongs, and a wide variety of other popular products.

It’s important to note that in some cases, goods fall into more than one tax slab depending on their value. For instance, clothing that costs over ₹1,000 is in this category, but less expensive apparel that costs under ₹1,000 is taxed at the 5% rate.

Similarly, Ayurvedic medicines are in this tax slab, while most other medicines and insulin are in the 5% slab. State-run lotteries, business class air tickets, and work contracts are just a few examples of the services in the 12% tax slab.

The 18% Tax Slab

Many sweet goods such as flavoured refined sugar, ice cream, pastries, jams, and cakes are in this tax slab, but it’s not just sweets.

This slab also contains a motley collection of diverse items such as printers, optical fiber, tractor parts, mayonnaise, and corn flakes. Additionally, at the end of 2017, the GST council moved 178 items from the luxury 28% tax slab to this tax slab.

The list of reclassified goods included some luxurious goods such as chocolate, granite, and chocolate-dipped wafers. But it also includes relatively essential

items such as detergent, fire extinguishers, mattresses, and dental floss.

Services in this tax slab include air conditioned hotels that serve liquor as well as telecom, IT, and financial services.

The 28% Luxury GST Slab

Designed to only apply to luxury goods, this slab features a melange of goods such as dishwashers, vacuums, and personal aircraft. It also includes luxury services such as race club betting, cinema, and five-star hotels.

Luckily, the vast majority of goods and services are not in this category.

You need to know which tax slab fits your goods or services, as well as those you buy. Typically, when you file your GST return, you get credits for the GST you pay on goods and services for your business, and that helps to lower the amount of GST you owe.

To get help you may want to invest in accounting software such as QuickBooks.