Introduction to GST Tariff

The description was read with various Section/Chapter notes which had statutory backing. Rules of interpretation also played a vital role in classifying goods in proper chapter/heading. Similarly in services, the levy was based on negative list regime from 2012 onwards i.e. except of negative list of services, all other services were leviable to service tax.

Levy under GST

in the GST regime, levy is covered under four different enactments. As per Section 9 of GST, 2017 there shall be levied a tax called the Central goods and services tax on all intra-state supplies of goods or services or both (except on the supply of alcoholic liquor for human consumption) on the value determined under, at such rates, not exceeding twenty percent, as may be notified by the Government on the recommendations of the Council. Similar provision exists in Section 9 of SGST Act, 2017 passed by various States and in section 7 of UTGST Act, 2017 for levy of State/Union Territory goods and services tax, respectively, on Intra-State supplies of goods and services or both on the value determined, at such rates, not exceeding forty percent, as may be notified by the Government on the recommendations of the Council.

GST’s Tariff, scope of

from the levy provisions under GST, it is clear that maximum rate of tax has been prescribed in the Act itself and no separate tariff schedule has been referred to therein. The task of fixing the rates below maximum rate has been left to the Government on recommendation of GST Council. In view of the aforesaid legal provisions of levy, GST’s tariff i.e. rates fixed for different goods or services cannot be a called primary legislature as same has not been passed by Parliament/State legislature but it is a delegated legislation. Further, the Government on its own cannot fix the GST rates or grant exemption without it being recommended by GST Council.

Adoption of Customs for classification of goods

In view of aforesaid and to avoid classification disputes, notifications issued by Government indicate that Customs Tariff has been adopted for descriptive classification of goods under GST. The Section Notes, Chapter Notes and Rules of interpretation of Customs Tariff have also been adopted. This is on excepted lines because IGST is also leviable on imported goods for which in any case, classification under Customs Tariff was required. Further GST Invoice Rules and return formats also require mention of HSN code of goods. It is prescribed that tax payers whose turnover is above Rs 1.5 crores but below Rs 5 crores are required to use 2-digit code and the tax payers whose turnover is Rs 5 crore and above are required to use 4-digit code. Tax payers whose turnover is below Rs 1.5 crore are not required to mention HSN code in their invoices. Adoption of Customs tariff in the notification would also help in fulfilling this requirement as said tariff is based on HSN. For services, said List/Annexure/Schedule contains list of services leviable to GST at various rates ranging from NIL, 5%, 12%, 18% and 28%. All other taxable services are leviable to 18% GST. In respect of goods, broadly all goods have been covered under aforesaid five rates, except for goods where GST is 3% for most of the items and 0.25% on Rough Diamonds. Majority of items are covered under 18% tax rate. A cess at various rates ranging from 12% to 28% (specific rate in certain cess) has been imposed on specified luxury and demerit goods to compensate States for revenue loss on account of implementation of GST.

Negative list of supplies

These are the supplies which have been declared as non-supplies of goods and services for levy of GST. Schedule III of CGST/SGST Act contains list of these activities. Since these are by law not taxable, no tinkering can be done bt Council in respect of these supplies. However, Council is empowered to recommend to Government to notify any other additional item as a negative supply.

Zero rated supply

The statutory concept of zero rated supply in terms of section 16 of IGST Act, may be distinguished fully exempted supplies notified on recommendation of Council. Statutorily, a zero rated supply means exports of goods or services or both; or supply of goods or services or both to a special Economic Zone developer or a Special Economic Unit. In other words these supplies even if otherwise taxable, are not to be charged to any tax. Credit of input tax is available for making these zero-rated supplies for export or SEZ, notwithstanding that such supply may be an exempt supply. Even where inputs/input service are partly used for making these supplies, credit attributable to such supplies is admissible in terms of section 17(2) of the CGST Act. However, exceptions contained in section 17(5) of act ibid are applicable for which no credit is available. Registered person can supply goods or services or both under bond or letter of undertaking, without payment of integrated tax and claim refund of unutilized input tax credit.

NIL rated or exempted supplies

While negative and zero rated supplies are those which are mentioned in statue, NIL rated supplies are those where Council has recommended no tax or 0% tax and are covered under notification issued by Government in this regard. No credit of input / input services would be available for these items. Further, a person exclusively engaged in the supply of these items, is also not required to take registration. Basically these are essential goods / services of daily use / need required by a lay man.

Threshold exemption

On recommendation of GST Council, the Government has fixed threshold limit for exemption across goods and services is aggregate turnover of Rs 20 lakh ( Rs 10 lakhs for special category states of Arunachal Pradesh, Assam, Himachal Pradesh, Jammu and Kashmir, Manipur, Mizoram, Sikkim, Nagaland, Manipur, Meghalaya, Tripura and Uttarakhand. A detailed write-up on the threshold exemptions to small taxpayers is given for this tariff.

Composition levy

Composition is an alternative method of levy of tax for tax payers whose yearly aggregate turnover of goods in the preceding financial year did not exceed Rs 75 lakhs to pay composition tax at fixed rates subject to conditions and restrictions. This limit of Rs 75 lakhs can extended up to Rs one crore on the recommendation of Council. However for Special Category States Tripura Mizoram, Manipur, Arunachal Pradesh, Himachal Pradesh, Meghalaya, Assam. For remaining State of Jammu & Kashmir and Uttarakhand the limit has to be decided. A detailed write-up on composition scheme is given about this tariff.

Manufacture on job work basis, now taxable as services

The GST is a consumption based levy, i.e. a levy on supply of goods and services and not on the basis of manufacture. Henceforth, the manufacturing activities undertakes on job work basis would be liable to good and service tax, as the earlier concept of non-levy of service tax when manufacture was involved has become redundant in the goods and service tax regime where levy of tax is based on supply. There is large number of Service Accounting Codes, for manufacturing activities undertaken in relation to specified goods and carried out on job work basis.

Alphabetical list of goods and services

The “Commodity Index” given in the end of this tariff is based on HSN Code and Customs tariff and is only for references purposes so as to help you in working out the HSN code and the rate of GST from GST rate schedule. You are advised to locate the relevant entry for your product in the GST rate schedule given here.