Chanakya IAS Academy Blog


GST Council unveils 4-slab rates for services

The Goods and Services tax(GST) council moved towards a multi-tiered service tax structure comprising 5,12, 18 and 28 percent, that will distribute services under four slabs.

Currently tax is levied at a uniform rate of 15 percent on all services.

Tax imposed on cinema:

  • Currently the total tax on cinema (entertainment and service tax) is in the range of 55 percent.
  • But states will have the option to levy additional tax to compensate for losses that arise because of the merger of entertainment tax with the Goods and services tax
  • This can be achieved through the legislative route by enabling local bodies to charge tax and utilize the revenue
  • States will also have the power to levy a new tax as the taxation power of states have been restricted not abolished after the rollout of GST

Tax imposed on services under the proposed indirect tax regime:

  • Education, healthcare and non-AC travel will continue to remain exempted
  • Luxury hotels, gambling, race club betting and cinema services will attract a levy of 28 percent
  • Telecom and financial services will be taxed at a standard rate of 18 percent
  • Transport services will be taxed at 5 percent • Cab aggregators (such as Ola and Uber) who currently pay 6 percent will be charged 5 percent under GST
  • A 1 percent tax collected at source will be imposed on e-commerce players such as flipkart and snapdeal
  • AC class rail travel will attract a tax of 5 percent • Metro trains, local trains and religious travel (includes Haj yatra) will be exempted from GST
  • A rate of 12 percent GST will be imposed on non-AC restaurants, while AC restaurants and will attract a levy of 18 percent
  • Though exempt from service tax, newspaper advertisements will attract a 5 percent GST
  • The tax on gold and precious metals will be taken up for discussion in the next meeting of the GST council

Impact of GST on the economy:

  • According to the finance minister the net impact of GST will not be inflationary once the system of input credits
  • A new concept of luxury services is introduced in GST, which is based on the assumption that higher tax can be imposed on such services
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