SKP Group
SKP GST Update
19 May 2017
Taxation of services under GST
 

The GST Council, on the second day of its 2-day meeting in Srinagar, has considered and finalised GST to be applicable for different types of services. Some key aspects related to services of the meeting have been captured below: 
  • As against expectations, the government has finalised four tax rates that will apply to services, namely 5%, 12%, 18% and 28%.
  • Education and Healthcare services to be exempt under GST
  • Transportation services to be taxed at 5%
  • Aggregators like Ola and Uber to be taxed at 5%
  • Economy class air travel to attract 5% GST and business class 12%
  • Complications which currently exist at the time of charging tax on Works Contract should be eased with Works Contract set to be taxed at 12%.
  • 5 Star and AC restaurants to attract higher taxes:
    • Restaurants with a turnover of INR 5 million or less will levy 5% GST
    • Restaurants without a liquor license and with a turnover higher than INR 5 million will be charged 12% GST.
    • AC restaurants and restaurants with a liquor license to fall under the 18% tax slab.
    • 5 Star hotels to levy 28% GST
    • Hotels with tariff below INR 1000 to be exempt
    • Hotels with tariff of INR 1000-2500 will levy 12% GST
    • Hotels with tariff above INR 2500 but below INR 5000 would attract 18% GST.
    • Hotels with tariff above INR 5000 to charge 28% GST. 
  • Telecom and Financial services to attract 18% GST
  • The highest tax slab i.e. 28% would be reserved for luxury services like cinemas, betting, etc.
  • No consensus on the fixation of rate on gold
  • List of exemptions which are in existence as per the current legislation being grandfathered are likely to continue in the GST regime.
 
SKP's comments
  • The government’s intention to fix the rates of tax based on the value of service is retrograde in nature and would lead to complications which could have been avoided.
  • As per the current service tax legislation, the tax rate of 15% was applicable to all services. However, since different tax slabs have been prescribed for different services, classification issues can lead to disputes in the future.
SKP
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skp.gst@skpgroup.com | www.skpgroup.com
 
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This update contains general information which is provided on an “as is” basis without warranties of any kind, express or implied and is not intended to address any particular situation. The information contained herein may not be comprehensive and should not be construed as specific advice or opinion. This update should not be substituted for any professional advice or service, and it should not be acted or relied upon or used as a basis for any decision or action that may affect you or your business. It is also expressly clarified that this update is not intended to be a form of solicitation or invitation or advertisement to create any adviser-client relationship.

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