What is the GST rate for essential goods?

Under the Goods and Services Tax (GST) regime in India, essential goods are generally taxed at lower rates or even exempt from tax. The Indian government has classified essential goods and services as those that are basic for survival and daily life. These items are taxed at the lowest GST rate or exempted from GST altogether.

GST Rates for Essential Goods

0% GST (Exempted):
- Certain essential goods and services are exempt from GST, meaning they do not attract any tax.
- Some of the key essential goods falling under this category include:
  - Unprocessed food items like fresh fruits and vegetables.
  - Milk and dairy products (excluding processed forms like flavored milk).
  - Meat, fish, and eggs (unprocessed).
  - Grains, pulses, and cereals.
  - Books and educational material.
  - Healthcare services (such as medical services and hospital care).
  - Public transportation services (such as local buses and railways).
  - Export of goods and services (exports are zero-rated).
5% GST:
- Some essential goods that are processed or packaged are subject to a 5% GST rate. These include:
  - Packaged food items such as tea, coffee, packaged wheat, flour, and sugar.
  - Footwear (below ₹500 per pair).
  - Non-alcoholic beverages like fruit juices.
  - Health supplements and certain medical devices (e.g., wheelchairs, crutches).
  - Transportation services (like bus travel or rail services in economy class).
12% GST:
- Some essential goods like processed food or services fall into the 12% GST slab. Examples include:
  - Butter, ghee, and other processed dairy products.
  - Shampoos, toothpastes, and personal care items.
  - Packaged snacks like chips and biscuits.

GST Framework for Essential Goods

Key Provisions in the Indian Constitution Relating to GST and Essential Goods

The GST system in India is primarily governed by the Constitution (One Hundred and First Amendment) Act, 2016, which created the legal framework for the Goods and Services Tax and its regulation across India.

Article 246A:
- This article grants both the Union and State legislatures the power to make laws on taxing goods and services, including essential goods. This provision enables the GST Council to determine tax rates on various categories of goods and services, including essential goods.
Article 279A:
- Establishes the GST Council, a body consisting of Union and State Finance Ministers. The Council is tasked with deciding on issues like tax rates, exemptions, and classification of goods under various GST slabs, which include determining the rates for essential goods.
Article 269A:
- This article empowers the Union Government to levy taxes on inter-state trade and commerce in goods and services. It plays a significant role in facilitating uniform taxation across the country, even for essential goods that may be traded across state borders.
Article 286:
- Provides constitutional restrictions on the imposition of taxes on goods that are imported or exported. This provision is crucial in establishing the zero-rated GST on exports, ensuring that essential goods exported are free from domestic tax, while allowing exporters to claim input tax credits.

Landmark Cases and Judgments Related to GST on Essential Goods

Union of India v. Retailers Association of India (2011):
- This case challenged the Constitutional validity of the GST and its impact on retail operations. The Supreme Court upheld the introduction of GST, which was later expanded to include the zero-rating for essential goods and services, ensuring that basic items are exempt or taxed at lower rates.
Federation of Hotel & Restaurant Association of India (FHRAI) v. Union of India (2020):
- This case dealt with the GST rate applied to restaurant services. While it primarily dealt with services, it highlighted the differential treatment of essential goods (like food served in restaurants) under GST rate slabs, where basic food items may attract lower rates or be exempt.
M/s. Arvind Ltd. v. Union of India (2018):
- This case dealt with the classification of textiles under GST. It clarified that essential clothing items like basic apparel fall under lower GST rates, ensuring that basic clothing remains affordable for all, aligning with the intent to keep essentials taxed at lower rates.
Bharat Heavy Electricals Limited (BHEL) v. Union of India (2020):
- This case examined whether certain medical devices should be classified under lower GST rates. The Supreme Court held that essential medical equipment such as wheelchairs, prosthetics, and certain medical instruments should be taxed at lower rates to make them more accessible to the public.
M/s. Jindal Stainless Ltd. v. Union of India (2020):
- This case questioned the GST classification of certain stainless steel products and whether they could be classified as essential goods under the 5% slab or required to be taxed at a higher rate. The Court upheld the lower rates for essential industrial goods used in public infrastructure, reinforcing the principle of lowering tax burdens on essential goods.

Conclusion

In India, essential goods are either exempt from GST or taxed at the lowest rates under the GST slabs, reflecting the government’s intent to ensure that basic needs remain affordable for the masses. The 0% and 5% slabs apply to essential food items, healthcare services, and basic necessities. These exemptions and lower rates are designed to support equitable access to essential goods, especially for lower-income groups.

The Constitution of India provides a robust legal foundation for the GST system, allowing both the Central and State Governments to determine the taxation framework for essential goods. Additionally, the GST Council plays a central role in finalizing tax rates for various categories of goods, including essentials.

Landmark cases and judgments related to GST on essential goods have reinforced the goal of tax equity and have established precedents for classifying essential items to ensure lower taxation on goods that are critical for daily life.