Services to become cheaper after GST, claims Jaitley

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Kunwar Prithvi Singh Chauhan
Part time journalist, full-time observer. Editor-in-Chief at The Indian Wire. I cover updates related to business and startups.

On the concluding day of GST meeting in Sri Nagar, union finance minister Arun Jaitley assured that the burden of services on common man will not increase their spends. While talking to the reporters after the day’s proceedings, Arun Jaitley claimed that most of the services will be kept under standard tax rate of 18% and this will not effect the common consumers as the effective tax rate will decline.

Arun Jaitley, who is also the chairman of GST council, further added that the services will have input tax credit and that will ensure customers do not have to shell out extra to use the services. The common expenditure for the customers will come down with the GST implementation.

Announcing that the next GST meeting will take place on June 3rd, Jaitley also said that majority of the work related to implementation of GST is now complete and the tax bill will be implemented as scheduled on July 1.

The tax slab for services will be the same as for goods. Majority of the services have been kept under 18% slab. Only 5 services, including five-star hotels, movie tickets, casinos, racing and betting on racing will attract a 28% tax rate. Education and healthcare will continue to remain out of the tax net, even after GST.

Majority of the services where common man is involved, are kept under 18% slab. This includes banking, IT services, government services, restaurants with AC and restaurants serving liquor. eCommerce services will also include 1% tax collected at source, apart from being in the 18% tax slab.

Giving more power to the small establishment, Jaitley told reporters that the merchants can claim back the tax paid for goods for establishment. This will effectively bring the tax rate on insurance and banking to around 15%. Also, the restaurants who no not serve alcohol or have AC, will be kept under 12% tax slab. Smaller restaurant operating with a turnover of less than ₹50 lakhs can avail GST’s composition scheme to have a tax rate of 5%.

Talking of the hospitality industry, hotels with room tariff below ₹2500 will attract 12% tax whereas hotels with tariff range of ₹2500-₹5000 will have 18% tax. Five star hotels with room tariff of over ₹5000 are kept under 28% tax slab.

Traveling in economy class will get cheaper as the tickets will now attract 5% tax. For the common man traveling in sleeper class trains, metro and with seasonal passes, will be exempted from the tax net. At the same time, business class air tickets will have 12% tax rate and traveling in AC trains will attract 5% of tax. Railway freight is also kept under the lowest rate of tax. Road transportation sector will have 5% tax rate. This also includes cab aggregators.

A few items which remain to be discussed, include precious metals such as gold and diamond. Items like packaged foods, textiles and footwear will also be discussed on the next GST meeting to be held on June 3rd.

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