The GST Council has finalized its prime work on services front by selecting 18% rate as the standard rate for the new GST network. As a result, bulk of the services will come under this rate including financial services, high end hotels, liquor licenses etc.
There is a four-tier service tax slab with education and healthcare coming under exempted category as now. The four rates under the GST for services are 5%, 12%, 18% and 28%. Besides this, there is an exempted list that has zero tax incidence.
Currently, services are taxed at 15% with a negative list comprising few sectors including education. Migration to a higher tax rate of 18% will not be inflationary as several services are taxed at lower rates of 5% and 12%.
The GST Council has made the ecommerce sector relatively unaffected as there is only a 1% deduction to be made by etailers to the sourcing firms.
Cab aggregators, goods transport, higher class railway and economy class airlines attracts 5% tax.
Altogether GST rates for 500 services were fixed by the Council. Some of the services are to be taxed afresh as the existing service tax laws were less specific on them. Though the present rate structure is final, new services may be brought under tax network within the next one year as the Council has to rework on the rate and services items at the implementation phase.
