The Finance Minister said four tax rates will be applied to services; Many indirect taxes will be replaced by the Goods and Services Tax
Arun Jaitley
Four tax rates will be applied to services such as telecom, hotels and transport under the Goods and Services Tax (GST) that is scheduled to be in place from July 1, Finance Minister Arun Jaitley announced after the meeting of the GST Council here yesterday. The rates - 5, 12, 18 and 28 per cent - are in line with those finalised for goods. GST will replace many indirect taxes imposed by the centre and the states.
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What is exempt
Education and healthcare will continue to be exempt from taxation in the upcoming GST regime that will tax services at four different rates with transport, including economy class air travel, being taxed at 5 per cent. With this, rates of all items except a handful including gold, have been decided.
Briefing reporters here after the two-day meeting of the Council, Finance Minister Arun Jaitley said telecom and financial services will be taxed at a standard rate of 18 per cent. Service tax on telecom like phone bill payment totals to 15 per cent at present.
Transport services will be taxed at 5 per cent. This rate will apply to cab aggregators like Ola and Uber as well as those who currently pay 6 per cent tax. Non-AC train travel will be exempt and the 5 per cent will be levied on AC travel tickets. Travelling on metro, local train and religious travel including Haj yatra will all continue to be exempt from GST, Revenue Secretary Hashmukh Adhia said.
Entertainment tax will be merged with service tax and a composite 28 per cent levy charged on cinema services as well as on gambling and betting at race course.
Taxes for hotels
Jaitley said non-AC restaurants will charge 12 per cent GST on food bills. Tax rate for AC restaurants and those with liquor licence will be 18 per cent, while 5-star hotels will charge 28 per cent GST. Restaurants with R50 lakh or below turnover will go under the 5 per cent composition, he said.
Net effect of GST will not be inflationary, he said.
E-commerce players like Flipkart, Snapdeal will have to deduct 1 per cent TCS (tax collected at source) while making payments to suppliers, Adhia said. There will be no tax on lottery.
Jaitley said July 1 will be the rollout date for GST. “We are in a state of readiness.”
Jaitley further said, “We made sure that consumers don't have to pay more. The net effect of goods and services is not going to be inflationary because, once the system of input credits starts the actual incidence is going to be positively impacted.”
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