83 services exempt from GST; 13 to get concessional 5% tax

COUNCIL WILL CONTINUE TAX EXEMPTION ON HEALTH, EDUCATION, SELECT GOVT SERVICES, BUDGET HOTELS AND MANY MORE

Thirteen services, including travelling by road and by air in the economy class covered under the government’s regional connectivity scheme, will attract a concessional 5% goods and service tax (GST) rate.

Moreover, seven services, including rail freight, business class air travel and construction services, will be taxed at 12%, according to the full GST schedule on services released by the GST Council late on Friday night.

The Council decided to continue tax exemption on services, including health, education, select government services, budget hotels charging less than ₹1,000 a day and services given to international bodies like the UN.

It also added a new item to the exemption list — services provided by the Goods and Services Tax Network (GSTN), the company that provides the IT infrastructure to Union and state governments and Union territories for the new indirect tax regime. That takes the total number of services out of GST to 83.

The bulk of the services, including seven specified services such as work contracts, hotels charging ₹2,500-5,000 rent a day and outdoor catering as well as all other services not specified in the schedule, will be taxed at 18%.

The government has over the last several years widened the service tax base through a negative list-based approach as per which all services other than those that are specifically excluded from taxation are taxed. In 2016-17, service tax collection jumped to ₹2.54 lakh crore from ₹2.11 lakh crore a year ago.

Finance minister Arun Jaitley had on Thursday said that GST is not inflationary on goods or services. Industry players, however, expressed concern. Bipin Sapra, tax partner, EY India, said while the efficiencies because of GST design would lower the effective tax rate, the overall rates of services are still higher than expected in some categories like luxury hotels, cinema halls and even essential sectors like telecom which has been taxed at 18%.