GST bills passed: An explainer about what the new tax reforms mean

The government is very optimistic about economic growth by 1 to 2 per centage affter the GST is rolled. What does it mean? Read the explainer here.

On Wednesday the Lok Sabha cleared all the four bills for the launch of the Goods and Services Tax. It is the country's biggest tax reform since 1947. The aim of the GST is to unify India into a common market and eliminate several central and state levies.
What do these tax reforms mean? The government says that the new indirect tax will increase government revenue and boost economic growth by 1 to 2 per centage points.

Here is an explainer:

• There will be no tax on essential items like rice and wheat
• Two standard rates of 12 and 18 per cent will cover most of the manufactured items and services.
• New regime will had four slabs of 1, 12, 18 and 28 per cents
• The lowest tax rate of 5 per cent will be for items such as spices, tea and edible oil while the highest at 28 per cent will be imposed on luxury cars, tobacco, aerated drinks and pan masala.
• The centre and the state would both asses taxpayers with annual turnover of above Rs 1.5 crore. In Northeastern states, those businesses with annual turnover of Rs 10 lakh and below will be exempt from GST. In other states the limit is at Rs 20 lakh.
• States will now have the power to assess taxpayers with turnover of below Rs 1.5 crore.
• Compensation bill will ensure states are compensated for the first five years due to revenue loss after the GST rollout. This money would given from a fund created by the centre.

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