According to the White Paper, there are 550 categories of goods under the VAT system. They are classified into the following four groups, depending on the VAT rate:
VAT @ 4%
The largest number of goods (270) comprising of basic necessity items such as drugs and medicines, agricultural and industrial inputs, capital goods and declared goods are under 4% VAT rate.
Exempted from VAT
There are about 46 commodities under the exempted category. This includes a maximum of 10 commodities that each state would be allowed to select, from a broader approved list for VAT exemption. The exempted commodities include natural and unprocessed products in unorganized sector as well as items, which are legally barred from taxation.
VAT @ 1%
This is for a specific category of goods like gold, silver, etc.
VAT@12.5%
The remaining commodities are under the general VAT rate of 12.5%.
Note: The few goods that are outside VAT as a matter of policy would include liquor, lottery tickets, petroleum products, as the prices of these items are not fully market-determined. These items will continue to be taxed under the sales tax act of the respective states.