Education, Healthcare Exempted From GST Regime; Rates on Services Fixed

• After Graduation


• 20 May 2017

The GST (Goods and Services Tax) Council have finalised tax rates for services under the GST regime on Friday at the end of day 2 of the meeting held in Srinagar. Education and healthcare have been exempted from the GST regime that will tax services at four different tax rates slabs.

Indian Finance Minister and the Chairman of GST Council Arun Jaitley said, “India has finalised four tax rates that will apply to services including telecoms, insurance, hotels, travel and restaurants under a new sales tax which should be rolled out on July 1,”

The GST Council finalised four tax rates as  5%, 12%, 18% and 28 percent – in line with those applying to goods. “Luxury services” would attract the highest rate of 28 percent . Only five services including five-star hotels, movie tickets, racing, betting on racing and casinos will attract maximum tax slab 28% levy.  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, travel, movie dates, e-shopping, visits to the salon and even your phone bills. The Council on Thursday approved the tax rates for 1,211 items, 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. Highlights of the tax slabs for services are – 

• From the total items 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.
• Telecoms and financial services will be taxed at a standard rate of 18%.
• Transport services will be taxed at 5%. This rate will apply to cab aggregators like Ola and Uber as well as those who currently pay 6% tax.
• Rail, air and road transport will fall in the 5 percent tax slab.

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• Railway freight will face 5% tax with input tax credit for services.
• Non-AC train travel will be exempt and the 5% will be levied on AC travel tickets.
• Economy class air travel will attract 5% GST while business class will be charged 12 percent.
• Travelling on metro, local train and religious travel including Haj yatra will all continue to be exempt from GST
• Non air-conditioned restaurants will attract a tax levy of 12 per cent GST on food bill whereas air-conditioned restaurants with liquor will fall in the 18 per cent tax bracket.
• Smaller restaurants with less than Rs 50 lakh annual turnover can avail of the composition scheme with 5% GST. This is a simplified system meant for small businesses.
• Hotels and lodges 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.
• The rates for capital goods, as well as industrial and intermediate items have been set at 18 per cent.
• Work contracts like white washing will be liable for a 12% GST.
• Entertainment tax will be merged with service tax under GST and a composite 28% levy charged on cinema services as well as gambling or betting at race course.  It may not result in a reduction in tariffs on cinema tickets as states continue to hold right to levy local charges on them.
• E-commerce players like Flipkart, Snapdeal will have to deduct 1% TCS (tax collected at source) while making payments to suppliers.
• There will be no tax on lottery.
• Live animals, fruit juices and meat will call for a 12% tax along with butter and cheese. Condensed milk under 18%. Coffee (not instant), tea and groundnut and fish will attract 5% under GST.
• 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

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Effective Tax Rates in GST Regime

“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 government aims to roll out GST from July 1, although industry has sought its deferral to September.  It is expected to add 2 per cent to the country’s GDP (Gross Domestic Product).

“GST regime will usher in lower taxes, seamless input tax credit, logistics savings and market share swings from unorganized to organised players,” said Aditya Narain, Research head at Edelweiss Securities Ltd.

Prime Minister Narendra Modi, who completes three years of his term this month, had said the new tax will not cause price rises, while aiming to bring down tax leakages in the complex tax system. The long-awaited GST has been hailed as India’s biggest tax overhaul since Independence in 1947. The government is keen on the earlier date as it wants to get the system in place well in advance of the festival season that starts a few months hence.

Here you got the details about GST Rates on Services. AfterGraduation  is thankful to GST Council and its Chairman, Mr. Arun Jaitley for exempting Education and Healthcare sectors from GST Regime. Have any doubts regarding GST slabs, Imapct of GST, you can ask us via the AfterGraduation Forum. Share this article “Education, Healthcare Exempted From GST Regime; Rates On Services Fixed” for clarity of GST rates on different services. Connect with us on Facebook and Twitter.