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.
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