JOIN USGST on services finalised
Phone bills, insurance premiums and banking services, among others, will become dearer when the GST regime kicks in on July 1.
Meeting in Srinagar on Friday, the GST Council put them in the highest 28% tax bracket. A host of other services are also set to become more expensive, as they will fall under a standard tax rate of 18%.
The current effective service tax rate is 15%, applied to all services except some, such as ambulance rides, sports events and pilgrimages.
Under the new GST regime, education and healthcare are completely exempted from service tax. Similarly, pilgrimages and metro and local travel attract zero tax. Air travel in economy class will be slightly cheaper as also travelling in Ola and Uber cabs, as the service tax on them goes down from the current 6% to 5%.
‘Effective rate lower’
Finance Minister Arun Jaitley said the effective incidence of service tax would be lower as service providers would be given credit for goods used in the services. Only the service component will be taxed. Talking to reporters in Srinagar after the conclusion of a two-day meeting of the GST Council, Jaitley said the government was “grandfathering” many items to make the net effect of GST non-inflationary. “Grandfathering” refers to the act of providing exemptions from a new law.
Transport services will be taxed at the lowest 5% to keep consumer goods, vegetables and fruit affordable.
Movies, eating out
Eating in non-airconditioned restaurants will attract a service tax of 12%, while airconditioned restaurants with a liquor licence pay 18%. Five-star hotels with restaurants pay 28%.
Movies, betting, gambling and race clubs will be taxed at 28%. That doesn’t mean movie outings get dearer. Entertainment tax, now in the region of 40%, will merge with service tax.
Tax experts say this will actually bring down the price of movie tickets. Hotels charging more than Rs 5,000 a night as room rent will attract a service tax of 28%, while those charging between Rs 2,500 and Rs 5,000 will attract 18%. Rooms charged at less than Rs 1,000 pay no tax.
Jaitley said the government’s anti-profiteering mechanism will ensure industry passes on the benefits to consumers.
Tax on gold and precious metals is yet to be decided, as state finance ministers could not reach a consensus. Some said a high tax rate would lead to more smuggling, while others favoured steep taxation. The next meeting of the GST Council, on June 3, will decide on the rates for such items.
Jaitley said there was no re-think on the July 1 deadline for the rollout of GST.Cess extra on carsSmall cars, a category under goods, will be taxed at 28%. However, Jaitley described reports that they will be costlier under GST as “erroneous”. He did not elaborate further.
According to the rates finalised by the council, small cars attract 1% cess over and above the peak rate of 28%. Small diesel cars attract a 3% cess. A 15% cess will be collected from mid-sized and luxury cars and SUVs.