GST Council unveils 4-slab rates for services

Srinagar/May, 19: Maintaining status quo on most exempted services, the Goods and Services Tax (GST) Council on Friday moved towards a multi-tiered service tax structure to distribute services under four slabs: 5, 12, 18 and 28 per cent. This was as against the single rate of 15 per cent levied on all taxable services currently. While education, healthcare and non-AC rail travel will continue to remain exempted under the proposed indirect tax regime, luxury hotels, gambling, race-club betting and cinema services will attract a levy of 28 per cent.
Revenue Secretary Hasmukh Adhia, however, said that states have the option to levy extra taxes on cinema to compensate for revenue losses due to merging of entertainment tax with GST. The total tax incidence on cinema, including entertainment tax and service tax, currently ranges around 55 per cent. In case a state wants to levy additional tax on cinema, it will have to use the legislative route to enable local bodies to charge the tax and utilise the revenue, Adhia told reporters after the second day of the 14th GST Council meeting here.
Also, he added, states have the freedom to levy any new tax since after the rollout of GST, taxation powers of states have been restricted, not abolished. Taxation rates for about 500 services were discussed Friday.
Telecom and financial services will be taxed at a standard rate of 18 per cent, while transport services will be taxed at 5 per cent. Cab aggregators like Ola and Uber as well who currently have to pay 6 per cent tax will also be charged 5 per cent tax under GST.
The GST Council has also decided a 1 per cent Tax Collected at Source (TCS) rate for e-commerce players such as Flipkart, Snapdeal, even though the law provides for a levy for 2 per cent tax rate, Adhia said.
The next meeting of GST Council is scheduled to be held on June 3, wherein tax on gold and precious metals will be taken up for discussion. Also, no tax has been decided for lottery and is likely to be discussed in the next meeting.
AC rail travel will attract 5 per cent tax although input tax credit will be provided. Economy class air travel will attract 5 per cent GST while business class will be charged 12 cent, Adhia said. Travelling on metro, local train and religious travel including Haj yatra will all continue to be exempt from GST, he said.
Non-AC restaurants will attract a GST of 12 per cent, while tax rate for AC restaurants and those with liquor license will be at 18 per cent, Finance Minister Arun Jaitley said.
Restaurants with Rs 50 lakh or below turnover can go for 5 per cent composition, he said. Work contracts like whitewashing will be liable for a 12 per cent GST.
Hotels and lodges charging per day tariff of Rs 1000 will be exempt from GST. Rate for hotels with tariff of Rs 1,000-2,000 per day would be 12 per cent while those with tariff of Rs 2,500 to Rs 5,000 would be 18 per cent. GST for hotels with tariff above Rs 5,000 would be 28 per cent.
Jaitley said the net effect of GST is not going to be inflationary. “We made sure that the consumers don’t have to pay more. The net effect of goods and services is not going to be inflationary because, once the system of input credits starts the actual incidence is going to be positively impacted,” he said.
He added that most existing exemptions have been grandfathered because those exemptions relate to areas where the government would not like any adverse impact of taxation.