GST rates finalised for services; education, healthcare exempt

Others taxed at 5, 12, 18, 28%

Education and healthcare will continue to be exempt from taxation in the upcoming GST regime that will tax services at four different rates with transport, including economy class air travel, being taxed at 5 per cent.

The GST Council finalised four tax rates of 5, 12, 18 and 28 per cent to apply on services including telecom, insurance, hotels and restaurants under the biggest tax reform since the Independence.

The rates are in line with those finalised for goods.

With this, rates of all items except a handful including gold, have been decided ahead of the roll out of the Goods and Services Tax (GST) regime from July 1.

Briefing reporters in New Delhi after the two-day meeting of the Council, Finance Minister Arun Jaitey said telecom and financial services will be taxed at a standard rate of 18 per cent.

Transport services will be taxed at 5 per cent. This rate will apply to cab aggregators like Ola and Uber as well as those who currently pay 6 per cent tax.

Non-AC train travel will be exempt and the 5 per cent will be levied on AC travel tickets.

Travelling on metro, local train and religious travel including Haj yatra will all continue to be exempt from GST, revenue secretary Hashmukh Adhia said.

Economy class air travel will attract 5 per cent GST while business class will be charged 12 cent, he said.

Jaitley said non-AC restaurants will charge 12 per cent GST on food bill. Tax rate for AC restaurants and those with liquor licence will be 18 per cent, while 5-star hotels will charge 28 per cent GST.

Restaurants with Rs 50 lakh or below turnover will go under the 5 per cent composition, he said.

Work contracts like white washing will be liable for a 12 per cent GST.

Entertainment tax will be merged with service tax under GST and a composite 28 per cent levy charged on cinema services as well as gambling or betting at race course.

While the rate proposed for cinema halls is lower than 40 to 55 per cent as per current incidence, it may not result in a reduction in tariffs on cinema tickets as states continue to hold right to levy local charges on them.

Hotels and lodges charging per day tariff of Rs 1,000 will be exempt from GST. Rate for hotels with tariff of Rs 1,000 to 2,000 per day would be 12 per cent while those with tariff of Rs 2,500 to Rs 5,000 would be 18 per cent.

GST for hotels with tariff above Rs 5,000 will be 28 per cent.

Jaitley said tax on gold and precious metals will be taken up at the next meeting of the Council on June 3.

GST on services was the main item discussed at the GST meet on Friday, he said, adding that most services tax exemptions will be grandfathered and they will continue.

Net effect of GST will not be inflationary, he said, adding that healthcare and education services will continue to be exempted from tax under GST.

E-commerce players like Flipkart, Snapdeal will have to deduct 1 per cent TCS (tax collected at source) while making payments to suppliers, Adhia said.

There will be no tax on lottery.

Jaitley said July 1 will be the rollout date for GST. "We are in state of readiness."

Photograph: Rupak De Chowdhuri/Reuters