The consensus reached between India’s national and state governments on how different products will be dealt with under the Goods and Services Tax (GST) marks another important step towards its implementation. The finance ministry on Friday confirmed both the tiers at which the GST will be applied (5%, 12%, 18% and 28%) and that agreement had been reached on the classification of over 1,000 items. In general, essentials such as healthcare products will be taxed at the lowest rate, and luxury goods at the highest. Almost all food items will be exempt while an additional “sin” rate (above 28%) will apply to alcohol and tobacco products. While this set-up has been criticised an unnecessarily complex, it was inevitable if the long-awaited tax reform was to have any hope of being implemented. The finance ministry’s July deadline still looks tight, but the GST could be introduced by Q4 this year.
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