The Rate Structure in GST refers to the framework of tax rates notified for goods and services under GST law, applicable uniformly across India. GST does not prescribe rates directly in the statute. Instead, the law authorises the Government to notify rates based on policy decisions taken by the GST Council. All such notified rates, read together, form the GST rate structure.
The structure is designed to balance revenue mobilisation with economic and social objectives, by taxing essential supplies at lower rates and luxury or demerit goods at higher rates.
Legal Basis for Levy of GST Rates
The authority to levy GST at specific rates flows from the charging provisions of GST law.
- Section 9(1) of the CGST Act, 2017 empowers levy of CGST at notified rates
- Section 5(1) of the IGST Act, 2017 empowers levy of IGST at notified rates
- Rates are notified only on the recommendations of the GST Council
The GST Acts confer the power to levy tax, while statutory notifications determine the actual rate applicable. These notifications are legally binding and enforceable.
2. Standard GST Rate Structure (Core Tax Rates)
GST rates are organised into standard rates, special rates, and alternate rates, depending on the nature of supply and policy intent. Each category is governed by specific provisions and notifications.
Standard GST Rate Slabs
The standard GST slabs are notified through rate notifications and represent the default tax structure under GST.
- 0% (Nil Rate) applies to essential goods to reduce tax burden on basic consumption
- 5% applies to commonly used goods and services with lower value addition
- 12% applies to supplies with moderate economic value and consumption
- 18% serves as the standard rate covering the majority of goods and services
- 28% applies to luxury, demerit, and sin goods with higher tax incidence
These slabs operate uniformly for goods and services, subject to classification and notification conditions.
GST Rate Structure for Goods
The rate structure for goods is notified under Notification No. 1/2017 – Central Tax (Rate), issued under Section 9(1) of the CGST Act. Goods are classified using HSN (Harmonised System of Nomenclature) codes and placed into schedules corresponding to the applicable GST rate.
- Goods are grouped into schedules based on HSN classification
- Each schedule is mapped to a specific GST rate slab
- Correct HSN classification is mandatory for accurate rate application
GST Rate Structure for Services
GST rates for services are notified under Notification No. 11/2017 – Central Tax (Rate). Services are classified using SAC (Services Accounting Code), and the applicable rate depends on the service description and conditions specified in the notification.
- Services are identified and classified using SAC codes
- The default GST rate for services is 18%
- Lower or nil rates apply only where expressly notified
3. Special GST Rate Categories
Certain supplies are treated differently from the standard rate structure due to their nature, destination, or policy intent. These are classified as special rate categories.
Nil Rated and Exempt Supplies
GST law permits certain supplies to be taxed at nil rate or fully exempted from tax. The power to grant such exemptions is provided under Section 11 of the CGST Act and Section 6 of the IGST Act.
- Exempt goods are notified under Notification No. 2/2017 – Central Tax (Rate)
- Exempt services are notified under Notification No. 12/2017 – Central Tax (Rate)
- Exempt supplies remain governed by GST law, though tax is not charged
Zero-Rated Supplies
Zero-rated supplies are governed by Section 16 of the IGST Act, 2017 and apply exclusively to exports and supplies to SEZ units or developers. This treatment ensures tax neutrality in international trade.
- Exports of goods or services
- Supplies to SEZ units or developers
- Outward supply is taxed at 0%
- Input Tax Credit is fully admissible
- Zero-rating is legally distinct from exemption
Compensation Cess Rates
In addition to GST, certain notified goods attract Compensation Cess. The authority for levying this cess is provided under Section 8 of the GST (Compensation to States) Act, 2017.
- Cess is levied over and above applicable GST
- Applies mainly to luxury and sin goods
- Rates are notified separately through cess notifications
4. Alternate GST Rate Structure
Composition Scheme Rates
An alternate rate structure is available for eligible small taxpayers under the Composition Scheme, governed by Section 10 of the CGST Act, 2017. Under this scheme, tax is paid at a fixed percentage of turnover instead of regular GST rates.
- Rates are concessional and notified separately
- Tax is paid on turnover, not on individual supplies
- Input Tax Credit is not permitted
This scheme operates independently of the standard GST rate slabs.
Structural Summary
- Standard Rates → 0%, 5%, 12%, 18%, 28%
- Special Rates → Nil-rated, Exempt, Zero-rated, Compensation Cess
- Alternate Rates → Composition Scheme rates