The Goods and Services Tax (GST) council on Thursday fixed tax rates on 1211 items, most of which are likely to become cheaper as the new rates will be lower than the current effective levies. On Friday Finance Minister Arun Jaitley made announcements related to taxes on services. The two-day GST Council meet attracted a lot of interest quite similar to the annual budget.
The council finalized the four-slab structure for taxation of services under GST. The standard rate has been fixed as 18% which is to apply to most of the services. The four slabs are in line with the tax rates for goods — 5%, 12%, 18% and 28%. Education and healthcare are to be exempted. Only five services — including five-star hotels, movie tickets, racing, betting on racing and casinos — will attract 28% levy.
Major portion of services will fall in the 18% bracket, including financial services like telecom, banking and insurance, information technology, government services such as auction of resources including spectrum, and restaurants that have air-conditioning or serve liquor. Ecommerce companies such as Flipkart, Snapdeal etc. will face 1% tax collected at source.
Union finance minister Arun Jaitley asserted that this won’t pinch the common man as the effective tax incidence is set to decline.
Jaitley, who is also the chairman of the GST Council, told reporters on Friday:
“These services will now get input tax credit… Net effect of GST on consumers will not be inflationary,”
Here are the goods and services categorized under the new four slabs:
The Council also stated that decision on Gold, Biodiesel products and Agricultural equipments will be taken on 3rd June.
Meanwhile, power, coal, renewable energy and mines minister Piyush Goyal said that the 5% GST rate on coal will make electricity affordable for the poor and farmers, apart from the overall benefits of greater transparency and less corruption.
On the other hand the auto industry is of the view that hybrid cars will be taxed even more than small petrol and diesel vehicles, equivalent to SUVs. Industries said that more clarity is awaited to see the full and final impact of GST rates.
It is to be noted that GST seeks to replace multiple state and central taxes of the country with a single levy and is proposed to be rolled out on July 1. However, industry has sought its deferral to September, 2017.