GST Council India's first truly federal institution: Drabu
- Author: Zachary Reyes May 21, 2017,
May 21, 2017, 21:50
"A 12 per cent rate for works contracts, with full input credit, is an encouraging development as it will be a simpler tax system and should reduce the cash component of the economy", said Pratik Jain, Partner and Leader Indirect Tax at Price Waterhouse Coopers. On the other hand, most of the services like mobile phone services, healthcare and transportation which are now charged at the rate of 15% will cost more, as these are expected to attract 18% tax under the GST regime.
The 14th Goods and Services Tax (GST) Council meeting, chaired by Finance Minister Arun Jaitley at Srinagar on Friday, agreed to fit many products in various tax brackets. Bindi, vermilion, glass bangles, handlooms, hearing aids and handmade musical instruments have also been exempt under GST. The GST Council finalised the rates for about 1,200 items on Thursday. Restaurants in 5-star hotels will attract a 28% tax, the same as that applicable to these hotels itself.
It shall empower the State to levy taxes on all intra-state supplies of goods and services or both, except on supply of alcoholic liquor for human consumption, at a rate to be notified not exceeding 20 per cent. With 18 per cent GST on machinery, there is neither loss nor gain.
Most of current service tax exemptions like education and healthcare have been continued and will continue under GST regime.
"While there may be issues of sovereignty and autonomy, the GST Council is India's first federal institution and we would like to see more moving ahead", he said. The base GST rates for the automobile sector have been set at 28 percent.
The Telecom industry has always hailed GST as an iconic reform, as it will bring in a new era of "one nation-one tax" for the country. But tax department estimates that the tax incidence on this will be unchanged at 15 per cent after the input credit is taken on equipment by the service providers. This rate will apply to cab aggregators like Ola and Uber as well as those who now pay 6 per cent tax.
Revenue Secretary Hasmukh Adhia said only 19% of goods on the list would be taxed at 18%, while 81% of goods would be taxed lower.
Under the GST rates, sweetened aerated water and flavoured water would attract 12 per cent cess over and above peak rate of 28 per cent. Rate for hotels with tariff of Rs 1,000 to 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.