New Delhi: Four tax rates will apply to services such as telecom, hotels and transport under the Goods and Services Tax (GST) regime that is targeted to kick in from July 1, Finance Minister Arun Jaitley announced in Jammu and Kashmir capital Srinagar after the meeting of the GST Council, a body of 32 state finance ministers that he heads.
- GST will not push prices up, most exemptions continue, says Arun Jaitley
- Air travel, AC train fares, road transport subject to 5% GST
- Services will have same multi-slab tax structure as goods
Services will be taxed under the multi-tier structure as goods; the council has fixed slabs at 5, 12, 18 and 28 per cent. GST will replace a bundle of indirect taxes imposed by the centre and the states and is expected to bring down tax leakages.
Transport services have been taxed at 5 per cent, work contracts at 12 per cent, telecom and financial services will attract 18 per cent tax, but healthcare and education have been exempted.
According to the tax slabs approved by the council, small restaurants would be taxed at just 5 per cent. But the rate progressively goes up to 12 per cent for restaurants without an air-conditioner and 18 per cent for those with an air-conditioner or a liquor licence. Diners in restaurants located in five-star hotels will, however, have to pay a 28 per cent tax.
The tax on room tariff, similarly starts with 5 per cent for tariff above Rs 1,000 and rises up to 28 per cent for rooms with a daily tariff in excess of Rs 5,000. There would be no tax on room tariff of less than Rs 1,000.
Phone bills also could go up once GST comes into force. It has been placed in the 18 per cent category, up from the existing 15 per cent that the telecom industry complained would make services pricier for subscribers. Movie tickets have also been placed in the highest tax bracket but the government insists that it was still less than the combined service and entertainment tax in most states.
Overall, Mr Jaitley said the net effect of Goods and Services Tax will not be inflationary. The government on Thursday kept basic food items out of the tax net, processed food items will be charged between 12 and 28 per cent. In some cases, such as aerated drinks, the council had cleared a 12 per cent cess in addition to the luxury tax rate of 28 per cent.
The government said the council's focus was to keep the tax rate low on affordable goods or services, progressively raising it for those that can be counted as a luxury.
In line with this principle, the council decided to exempt non-AC train travel but charge 5 per cent on tickets for travel in AC compartments. The 5 per cent rate will also will apply to cab aggregators such as Ola and Uber as well. Travelling on metro, local train and religious travel including Haj yatra will continue to be exempt from GST, Revenue Secretary Hashmukh Adhia added.