4-tier GST slabs for services
Edu, healthcare exempted; 18% tax on telecom, financial services
Now, long wait for the most sought-after tax reform since the Independence is over as the Goods and Services Tax (GST) Council finalised tax slabs for all services on Friday. The services have been fitted in four separate slabs of 5, 12, 18 and luxury rate of 28 per cent. However, the education and health sectors are completely exempted under the new tax regime.
The GST council will meet again on June 3 in New Delhi to finalise residual issues before rolling out the uniform tax regime across the country on July 1. The Council has already finalised the tax rates for 1,211 items.
Concluding the two-day GST Council meeting, Union Finance Minister Arun Jaitley said that the Council finalised the tax rates for all services, including insurance, hotels and restaurants as well, under different tax categories. Around 150 dignitaries, including Finance Ministers and Finance Secretaries of 29 States and three UTs, attended the meeting to finalise the roll out of the GST.
Addressing a Press conference, Jaitley said the 5 per cent slab will mostly cater to transport services, including economy class air travel. “This rate will apply to cab aggregators like Ola and Uber as well as those who currently pay 6 per cent tax,” he added.
While non-AC train travel will continue to be grandfathered, the 5 per cent tax would be levied on AC travel tickets. “Travelling on metro, local train and religious travel, including Haj yatra, will continue to be exempted from GST,” he said, adding “Economy class air travel will attract 5 per cent GST while business class will be charged 12 per cent.”
Jaitley also said telecom and financial services will be taxed at a standard rate of 18 per cent. Service tax on telecom like phone bill payment totals to 15 per cent at present.
However, Revenue Secretary Hashmukh Adhia insisted that the tax incidence on telecom services will be unchanged at 15 per cent after the input credit is taken on equipment.
Jaitley said the luxury category of 28 per cent includes five star hotels, gambling, race clubs, betting and cinemas. He said the entertainment tax has been merged with service tax and a composite 28 per cent levy charged on cinema services as well as gambling and betting at race course.
Jaitley said that non-AC restaurants would be taxed 12 per cent GST on food bill. “Tax rate for AC restaurants and those with liquor licence will be 18 per cent. Restaurants with Rs 50 lakh or below turnover will go under the 5 per cent composition,” he added.
Also, hotels and lodges with room rate below Rs 1,000 a day will be exempted from GST, while those with room rate of between Rs 1,000 and Rs 2,500 will be taxed at 12 per cent and five-star and luxury hotels will be taxed at 28 per cent. Jaitley also said that there would be no tax on lottery from July 1, while e-commerce players like Flipkart, Snapdeal will have to deduct 1 per cent TCS (tax collected at source) while making payments to suppliers.”
Work contracts like white washing will be liable for a 12 per cent GST.
“Tax on gold and precious metals would be taken up at the next meeting of the Council on June 3. GST on services was the main item discussed at the GST meet on Friday,” said Jaitley.
The Finance Minister said the GST has no relation with subsidies and the States, who won’t implement GST regime, will put the consumers under burden of double taxes on various items and services. He said that the remaining issues related to six categories of goods will be deliberated in June 3 meeting in the national Capital.
“Most of the work on the rollout has been cleared. On We need some more input on the pending issues. The 15th meeting of the GST commission has been fixed at New Delhi on June 3,” he said.
Telephone bills and mobile handset prices will go up from July 1 when the new Goods and Services Tax regime kicks in, raising incidence of taxation on the telecom sector. The GST Council on Friday finalised 18 per cent tax on services rendered by telecom operators against 15 per cent at present.
This translates into a Rs 3 increase on a Rs 100 recharge or a monthly rental but revenue secretary Hasmukh Adhia insisted that consumers will not burdened if telecom companies were to take into account the benefit of input tax credit they will get under GST.
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