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GST rates: Services to have 4 slabs; education, healthcare exempted

19 May, 2017 10:57 AM
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GST rates: Services to have 4 slabs; education, healthcare exempted

The GST (Goods and Services Tax) Council on Friday finalised tax rates for services. Education and healthcare has been exempt from the GST regime.

"India has finalised four tax rates that will apply to services including telecoms, insurance, hotels and restaurants under a new sales tax which should be rolled out on July 1," Finance Minister Arun Jaitley said.

The tax rates will be 5, 12, 18 and 28 percent - in line with those applying to goods. Telecoms and financial services will be taxed at a standard rate of 18% while transport services will be taxed at 5%, Jaitley told reporters after a meeting of the GST Council in Srinagar.

The tax rate on gold has not been finalised yet and the Council will meet again on June 3.

The new tax rates would affect everything from your restaurant visits, movie dates, visits to the salon and even your phone bills. Rail, air and road transport will fall in the 5 percent tax slab. Non air-conditioned restaurants will attract a tax levy of 12 per cent whereas air-conditioned restaurants will have fall in the 18 per cent tax bracket. Hotels with tariff between Rs 2,500 to Rs 5,000 will attract a GST of 18 per cent, whereas hotels with tariff of above Rs 5,000 will fall under the 28 per cent tax slab. However, hotels with tariff under Rs 1,000 are exempt from the GST regime.

"Services, which are at currently taxed 15 per cent will be fitted into the 18 per cent bracket. However, services will get the benefit of input tax credit for the goods used, so real incidence of taxation will be lower than the headline rate," Kerala finance minister Thomas Issac said after the GST council meeting. "Luxury services" would attract the highest rate of 28 per cent, he added.

The Council on Thursday approved the tax rates for 1,211 items, of which 7 per cent will be exempted, 14 per cent will be in the 5 per cent slab, 17 per cent in the 12 per cent category, 43 per cent in the 18 per cent segment, while 19 per cent of goods will go into the top tax bracket of 28 per cent.

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"Telecom services would continue to be taxed at the same rates of the past. Not in a single case has there been an increase in taxes from before," the Kerala finance minister said.

81 per cent items will attract tax of 18 per cent or below, while 19 per cent of items will be taxed at the highest rate of 28 per cent.

Finance Minister Arun Jaitley yesterday said that while the overall basket of taxes will see a reduction, he hoped for greater tax buoyancy because of greater efficiency and less tax evasion.

"On many commodities there would be reduction because of the cascading effect, but we are banking on the hope that because of a better tax system and less evasion there would be tax buoyancy," Jaitley said.

The rate for capital goods, as well as industrial and intermediate items have been set at 18 per cent.

The government aims to roll out GST from July 1. It is expected to add 2 per cent to the country's GDP or gross domestic product.

Also read: GST Council Hikes Cess On Cigarette To Offset Makers' Windfall

Source: timesofindia.indiatimes.com

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