Mobile and financial Services will cost more, but health and education will be cheaper; Prices of televisions, refrigerators and air-conditioners are set to go up to 5%
Clearing the decks for the final roll out on July 1, the Goods and Services Tax (GST) Council at its meeting in Srinagar on Friday fixed the rules and tax rates for commodity and services. However, GST rates for goods like gold, textile, footwear and precious metals are likely to be decided in the Council's next meeting scheduled for June 3.
Education and health services will continue to enjoy exemption, but telecom services will come under 18 per cent tax bracket. The current service tax rate is 16 per cent. Service tax go up on telecom and business class air travel.
"There were set of services which were exempted at present. These exemptions will continue. Besides the exempted category of which one of the principal items will be health care and education as a class will be exempted," Union finance minister Arun Jaitley told reporters at the end of two-day meeting.
GST Council on Thursday had fixed tax rates of the 1,211 items.
In the new tax regime, consumers will pay more for luxuries goods and services.
Prices of televisions, refrigerators and air-conditioners are set to go up to 5 per cent from July 1 as the Council has proposed 28 per cent GST on consumer electronics and durables.
The Council decided to have four rate slabs for services, 5 per cent, 12 per cent, 18 per cent (standard rate) and 28 per cent for luxury services.
Once claimed as the nationwide single tax rate regime, the GST has now altered into four different rates, ranging from 5 per cent to 28 per cent. Out of 12,000 commodities, 81 per cent, items attract GST rate of 18 per cent or less and 19 per cent fall in 28 per cent. Six categories for GST haveyet not been finalised, including gold and precious metal.
Rates have been fitted in different slabs as expected. The basic items-- eggs, milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour -- are exempted.
Essential items such as coffee, tea, spices fall into the 5 per cent tax category.
Common use items such as picture books, umbrella, sewing machines, and cellphones fall in the 12 per cent tax category.
Standard items such as notebooks, steel products, printed circuits, camera and speakers fall in the 18 per cent tax category;
Demerit goods and rich people's items such as aircraft for personal use fall in the 28 per cent category.
"I expected two or three slabs. 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. This will need to be corrected. We can't discourage food processing, food packaging so much. Overall, the rates send a positive sentiment, particularly for Aam Aadmi and d also for Urban Middle Class," said former CBEC chief Sumit Dutt Majumder to DNA.
Finance Ministry Arun Jaitley claimed that GST Bill will be consumer friendly.
He said that "mobile services will be charged at 18 per cent, but they will get input credit. So the tax incidence may occur at present or lower."
Transportation services are being proposed to be taxed at 5 per cent under GST. The GST Council has made its intention to tax luxury services at a higher rate quite evident by announcing different rates for services such as hotels, five-star restaurants, based on their tariffs and other factors which distinguish luxury services from non-luxury services. Hotels and five-star restaurants services with tariffs more than Rs 5000, gambling, admission to cinemas and racing events have been kept at the highest rate side- 28 per cent.
Travelling on the metro, local train and religious travel including Haj yatra will all be continued to be exempt from GST, Hasmukh Adhia, Secretary(Revenue) said.
Council decided to levy 18 per cent GST on AC restaurants and those with liquor license while 5-star hotels have to pay 28 per cent. GST on work contract will be taxed at 12 per cent with credit inputs on some items like steel and cement.
"There is still no clarity on whether such services would also attract levy of an additional compensation cess," said Rajeev Dimri, Leader, Indirect Tax, BMR & Associates LLP said.
GST is likely to have limited impact on inflation as the large portion of the consumer price index (CPI) basket exempted from the effective tax regime, said rating agencies Moody's Indian services in a note on Friday.
The Council, also, cleared GST rules about composition scheme, valuation, input tax credit, invoice, payment, refund and registration, along with relevant forms and formats.
...& ANALYSIS
- GST was initially described as a single-tax regime. But now it has transformed into a four-slab tax system
- Currently, taxes account for about 25 per cent of the average product price.
- The new regime aims at bringing down tax leakages in the complex tax system.
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