GST in India covers tax slabs for goods and services, vital for businesses. This blog discusses the latest 2024 GST rates, sector-specific slabs, and the use of HSN/SAC codes for classification. Understanding these rates helps businesses manage tax liabilities, avoid penalties, and optimise pricing for compliance, while ensuring smoother financial operations and effective tax planning.
Indirect tax or GST is an essential component of India’s taxation system, since it specifies the tax structure on supply of goods and services. With multiple rate slabs and change of rates at intervals, businesses have to be vigilant in order to keep in compliance. In this blog post recent trends and changes in GST rates, sectoral slabs and methods of ascertaining GST are all discussed.
This blog is about the pattern of GST rates in India, including the new slabs for 2024, different rates for different sectors, and using HSN/SAC codes to classify goods and services. It talks about the effects of changes in the rates on businesses, and how to go about the processes involved in calculating GST accurately so as to avoid issues during the fiscal year in case rates change.
Why Knowing GST Rates is Important for Businesses?
Understanding the GST rates is essential for any business in order to comply with the tax policies, avoid incurring penalties as well as limit the losses due to improper pricing. Correct awareness of the GST rates helps in ascertaining tax liability which in turn helps manage the costs.
It also helps in claiming Input Tax Credits (ITC) which assists in minimising the overall tax costs. Therefore, knowing the GST rates is necessary to avoid disruptions in day-to-day activities and provide effective financial management.
GST Rate Slabs in India
GST rate slabs in India categorise goods and services into five primary tax brackets, ranging from 0% to 28%. These slabs help businesses identify the appropriate tax rates for their products, ensuring proper GST compliance. Understanding these slabs is essential for correct pricing, tax liability management, and maximising Input Tax Credit (ITC).
Overview of GST Rate Slabs
The Goods and Service Tax (GST) applicable in India is distributed in to five main rate tiers, each of which is aimed at specific group of goods and services:
- 0% GST – Exempted goods and services like basic food stuffs and medical treatment services.
- 5% GST– Non-luxury products and services such as ready-to-eat meals and modes of travel.
- 12% GST– Twelfth percent bracket contains GST on the services and goods that are known as intermediate products – for example processed food products and office applications.
- 18% GST – The normal rate of taxation on most of the goods and services offered.
- 28% GST – Higher end goods such as cars & other vehicles as well as high end services.
These slabs guarantee that there is tax fairness while also encouraging mutually exclusive businesses.
Calculation of GST on Goods and Services
To calculate GST on goods and services, businesses need to consider whether the transaction is intra-state or inter-state:
- Selling Price Determination:
Selling Price is the sum of the Cost Price and Profit Amount. - Role of the Calculator:
The calculator considers the Selling Price as the total value of goods or services subject to GST. - GST Rate Variation:
GST rates vary depending on the type of goods or services.
Revised GST Rates in 2024
The GST Council introduced key revisions to GST rates in 2024, impacting multiple sectors.
Major Changes in GST Rates for 2024
The Goods and Services Tax or GST rates of India for the Year 2024 have been effectively classified into five slabs comprising 0%, 5%, 12%, 18%, and 28% respectively. Knowledge of these rates is important for businesses to comply, while for consumers, it provides insights into the taxation of products and services.
Goods and Services with Reduced GST Rates
Lately, the following GST rates cut has been agreed to:
- ‘Disabled friendly’ automobiles (fitted with retrofitting kits): Tax reduced to 5%.
- Keytruda: Important cancer drug sales with GST rate of 5% only.
- Goods traded between India and Bangladesh: currently declared exempt from IGST.
Apart from that, these particular cuts are targeted at the availability of certain goods and services.
GST Rates on Specific Goods and Services
This section outlines the GST rates applicable to various goods and services. It highlights specific categories like hotels, cars, electronics, and more.
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GST Rates on Hotel Rooms
The goods and services tax (GST) rates on hotel rooms differ based on the tariff range of such rooms.
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- 0% GST: A tariff of rooms that is less than ₹1,000
- 12% GST: A tariff of room between ₹1,001 and ₹7,500
- 18% GST: A tariff of rooms that is more than ₹7,500
These rates guarantee fair taxation across all types of hotel accommodation.
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GST Rates on Cars
Different types of vehicles incur different rates of GST:
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- Electric vehicles are at 18% GST to encourage its use.
- vehicles that belong to the class of SUVs, luxury sedans and other high end vehicles incur a 28% GST + another Cess taxation is chargeable.
- Normal cars that run on petrol and diesel will attract 28% GST.
- 12% GST is charged on ambulances and other purpose built vehicles.
These different classes seek to address affordability, whilst still imposing some reasonable level of taxation.
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GST Rates on Gold and Diamond
The GST rates for precious metals, including gold, diamonds and other items, vary as per the item.
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- Applicable on gold: 3 per cent tax. This is on gold plated jewelry and gold bars so the tax on this closely used material is kept very low.
- Applicable on diamonds: 1.5 percent tax. This is applicable on both naked diamonds affixed in jewelry, i.e., studded with diamonds enhancing growth in the jewelry industry.
These rates are part of the Indian taxation system, hence making doing business in precious metals easier.
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GST Rates on Mobile Phones and Electronics
GST rates for mobile phones and electronic goods depend on the price and category:
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- 18% GST on mobile phones: This includes smartphones, laptops, and tablets, making electronics more affordable for consumers.
- 28% GST on high-end electronics: Applied to expensive gadgets like luxury televisions, premium sound systems, and other advanced electronics.
The electronics sector is affected by these rates, influencing consumer pricing and purchasing patterns.
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GST Rates on Medicines
Different GST rates on medicines as per the classifications in the healthcare sector are as follows:
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- No GST On life-saving medications: Having medicines required for treatment of diseases that are critical, and others as life-saving drugs, every person is able to access Treatment without additional tax to pay.
- 5% GST on basic health care essentials: Covers over-the-counter (OTC) medications that are readily available and fairly priced to the wide majority of the population.
- 12% GST on Generic medicines: Covers a vast variety of lifestyle medicines and other medical services, devices and supplies.
These rates strive to maintain a level of affordability and the revenue generation which is required for healthcare financing.
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GST Rates on Clothes and Textiles
Goods and services tax rates applicable to textiles and clothing are determined on the basis of the value of the product:
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- 0% GST on fabrics costing less than ₹1,000: This is with a view to guaranteeing that basic inexpensive clothing is accessible to all.
- 5% GST on fabrics that cost more than ₹1,000: This is a mid-tier range of fabrics where quality is relatively higher but the tax on these materials isn’t prohibitive.
- 12% GST on branded clothing: This concerns high-end or designer wear, persisting the notion that luxury wears should also be taxed.
The Goods and Services Tax (GST) on food items and services in India varies based on factors such as the type of product, packaging, and the nature of the establishment providing the service. Here’s a detailed breakdown:
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GST Rates on Food Items
- 0% GST (Exempted Items):
- Fresh fruits and vegetables
- Unprocessed cereals and grains
- Fresh milk and curd
- Unbranded bread
- 5% GST:
- Branded and packaged food items
- Dried fruits and nuts
- Packaged paneer and lassi
- 12% GST:
- Processed foods like fruit juices
- Preserved vegetables and fruits
- 18% GST:
- Chocolates and confectioneries
- Ice creams
- Instant food mixes
GST Rates on Restaurant Services:
- 5% GST (Without Input Tax Credit):
- Standalone restaurants, including takeaway services
- Restaurants within hotels with room tariffs less than ₹7,500 per day
- Canteens and mess facilities operating on a contract basis
- 18% GST (With Input Tax Credit):
- Restaurants located within hotels where the room tariff is ₹7,500 or more per day
- Outdoor catering services
- Food services provided in premises arranged for functions or events
Recent Developments
As of December 2024, the GST Council is considering reducing the GST rate on food delivery charges by e-commerce platforms like Zomato and Swiggy from 18% to 5%, effective January 1, 2025. This proposal aims to align the tax rate on delivery services with that of restaurant services, potentially making food delivery more affordable for consumers.
Implications for Consumers and Businesses:
- Consumers: Understanding these GST rates helps in anticipating the final billing amount when dining out or purchasing food items. For instance, dining in a standalone restaurant attracts a 5% GST, whereas dining in a luxury hotel restaurant may attract an 18% GST.
- Businesses: Restaurants and food service providers must apply the correct GST rates based on their establishment type and services offered. Compliance ensures proper tax collection and remittance, avoiding legal complications.
The outlined rates are meant to assist in providing a structure which encourages it’s compulsory application in the clothing and textile industry and its effects will be felt on the prices and the supply side of the industry.
Special GST Rates and Sector-Specific Categories
The GST rates applied to specific sectors like healthcare, real estate, and hospitality. Understand the impact of these specialized rates on businesses and consumers.
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GST Rates in the Healthcare Sector
In the healthcare industry, GST rates also depend on the type of services offered and the products sold.
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- 0% GST: Primary healthcare services, with an objective to not impose much tax burden on such necessary treatment services.
- 5% GST: Important medical instruments that help to bring down the cost of essential healthcare services.
- 12% GST: Facilities and hospital-based high-class medical instruments – which go a long way in enhancing the existing healthcare infrastructure.
These rates also affect health services and their users by ensuring that necessary services and facilities remain relatively low-priced.
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GST Rates in the Real Estate Sector
In real estate, GST rates vary depending on the class of property.
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- 1% GST: Affordable housing projects encourage investment in low-cost housing initiatives.
- 5% GST: For sale in current construction properties to keep prices of new houses and commercial properties affordable.
- 0% GST: For sale completed properties to ease the burden buyers of ready-occupancy units.
The outlined rates are meant to promote the construction of houses, while the properties are easy for the public to buy.
Understanding HSN and SAC Codes in GST
HSN and SAC codes play a crucial role in the GST system by ensuring consistent classification and proper rate application for goods and services.
HSN Code System for Goods Classification
The HSN (Harmonized System of Nomenclature) code system is necessary for the categorization of goods under the Goods and Service Tax (GST):
- 6-8 Digits: HSN codes are numeric codes on 6 or 8 Digits to systematically identify goods across the globe without anomalies.
- Example: HSN Code 1006 is for rice which is taxable at the rate of 5% GST.
- It further assists the business organizations and tax authorities in the classification of goods easily and applying the respective GST correctly.
SAC Code System for Services Classification
SAC (Service Accounting Code) system enables categorization of services for the purposes of GST:
- Service identification: Every category that comes under GST, has a unique SAC code assigned to it.
- For instance, 9986 is service accounting code for restaurant cuisines and attracts 18% tax under GST.
- The SAC system works well in that services are taxed correctly according to their classification.
How to Calculate GST Rates Using GST Calculator?
The following steps can be used for calculating GST:
Step 1: Determine the GST amount of the item. GST Amount = Price x GST%
Step 2: Determine the net price that is the cost of the product plus GST amount Net Price = Cost of the product + GST amount
For example:
Assume product price Rs. 100, GST is 18%,
Thus, GST Amount = 100 x 18% = Rs. 18
Net Price = 100 + 18 = Rs. 118
The following steps can be used for calculating the inverse of GST:
- Step 1: Consider GST inclusive price to be original cost consider Original Cost = GST Inclusive price − Original Cost x ( 100 100 + GST% )
- Step 2: Work out the net price as original cost less the GST amount Net Price = Original Cost − GST Amount
For example:
The price of the product including 18% GST is Rs. 118.
Therefore, Original Cost = 118 – [ 100 / 100 + 18 % ] = Rs. 100.
Using an Online GST Calculator
Under the unified GST system, taxpayers can easily determine the tax applicable on various goods and services. To calculate GST, it’s important to know the applicable GST rate for each category. The slabs of gst are 5%, 12%, 18%, and 28%.
For example, if a good or service is priced at Rs. 1,000 and the applicable GST rate is 18%, the calculation will be:
Net Price = 1,000 + (1,000 x 18%) = 1,000 + 180 = Rs. 1,180.
Manual Calculation of GST
The Goods and Services Tax (GST) can either form part of the price quoted or can be added/charged separately. It is also very important to be clear on whether the price is inclusive or exclusive of GST in order to apply the justified amount of tax. The subsequent computations and their corresponding calculations are all aimed at computing GST for each distinct scenario of the price that has been quoted.
GST Exclusive Price
When the price quoted does not include GST, use this formula to calculate the GST amount:
GST Amount = 100 Cost Amount × GST Rate Percentage
Example: If the cost of a product is ₹1,00,000 and the GST rate is 5%, then:
GST Amount =1001,00,000 × 5 = ₹5,000
Adding this to the original price:
Net Price = ₹1,00,000 + ₹5,000 = ₹1,05,000
GST Inclusive Price
When the price quoted includes GST, use the following formula to extract the GST amount:
GST Amount=GST Inclusive Price−[GST Inclusive Price×100+GST Percentage100]
Example: If the GST-inclusive price is ₹1,00,000 and the GST rate is 5%, the GST amount is:
GST Amount=1,00,000 − [1,00,000×100+5100] = 1,00,000 − 95,238 = ₹4,762
In this case, the original price before GST would be:
Original Price = ₹1,00,000 − ₹4,762 = ₹95,238
GST on MRP
To calculate GST on the Maximum Retail Price (MRP), simply replace the GST-inclusive price in the formula with the MRP. Ensure that the MRP includes the GST component before applying this method.
By understanding whether the price includes GST or not, you can easily calculate the correct tax amount and total price for any goods or services.
Conclusion on GST Rates
GST rates in India are structured in different slabs including 5%, 12%, 18%, and 28%, depending on the goods and services in question. Certain sectors, such as healthcare, real estate, and hospitality have been earmarked for special rates to make the tax system more diverse. The recent changes made to these rates have some positive and straightforward objectives regarding the tax structure encouraging more tax compliance.
For businesses, staying informed about GST regulations is essential for seamless operations. Professional services can help the complexities of compliance and optimise your tax planning.
FAQs on GST Rates in India
What is the highest GST rate for goods and services in India?
The highest GST rate applicable to goods and services in India is 28%. This rate is levied on items like luxury cars, certain electronic goods, and high-end services.
Have GST rates changed for essential goods in 2024?
Yes, GST rates for essential goods have seen revisions in 2024. For example, certain cancer treatment drugs and retrofitting kits for disabled vehicles have experienced rate reductions.
How to use HSN/SAC codes to determine GST rates?
HSN (Harmonized System of Nomenclature) and SAC (Service Accounting Code) are used to classify goods and services under GST. By identifying the correct HSN/SAC code, you can easily determine the applicable GST rate for specific items or services.
Is there a separate GST rate for electric vehicles?
Yes, electric vehicles are subject to a reduced GST rate of 18%, making them more affordable compared to conventional vehicles that attract higher GST rates.
Are there exemptions for healthcare under GST?
Yes, certain healthcare services are exempt from GST. Basic healthcare services, such as consultations and treatments, are typically not subject to any GST, while medical devices and advanced treatments may attract a reduced rate.
