India finalises four GST rates for services

The Council concluded its two-day meeting in New Delhi with the decision to apply the same four tax rate slabs for services as for goods, but exempted healthcare and educational services from the purview of the GST.

The Goods and Services Tax Council on Thursday approved all nine rules required to roll out the new tax regime from July 1. For air-conditioned restaurants, the tax rate will be 18 percent. According to reports, this is not going to have good results for people who want to buy gadgets, as the tax on things like mobiles, DTH, Internet services, and so on are likely to go up. Since service providers will get tax input credits, he said, the effective tax rate will be lower.

The cost of food grains, particularly, rice and wheat, are expected to decrease as they will be exempted from the GST.

The Cellular Operators Associations of India (COAI) said that the telecom sector pays around 30 per cent of its earnings in taxes and levies, including spectrum usage charge and licence fees. Around 7% of the items, which include essential goods such as milk, fruits, cereals and poultry, have been exempted from all taxes.

"Rates have been finalised for the rest", he said.

Restaurants with Rs 50 lakh or below turnover will go under the 5 per cent composition, he said.

"Besides, the inclusion of 10-13 seater vehicles used mainly for public transport in the same tax bracket as luxury cars with a 15 per cent cess is also unexpected and may merit a review", Dasari said. That takes the total number of services out of GST to 83.

While small petrol cars with an engine less than 1,200 cc will attract 1 per cent cess, those with a diesel engine of less than 1,500 cc will attract 3 per cent cess.

There will be four rates for services at 5%, 12%, a standard rate of 18% and luxury rate of 28%.

The Council fitted all but six items in 5, 12, 18 or 28 percent tax brackets.

Participating in the debate, state Finance Minister SB Behera said the GST Council had accepted at least seven proposals of the Odisha government. Both of these along with foodgrain have been added to the exempt list, which means there will be no GST on these commodities. The only unhappy situation that needs to be corrected in next Council meeting - while basic raw food is exempted, the same stuff when packed and branded, which is good for food safety and health will attract 18 per cent.

"We would have liked to see a similar differential duty on hybrid vehicles to continue", he said. There is no increase. "On some we have deliberately brought tax down".

  • Leroy Wright