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GST: Telecom, insurance, banking, biz-class airfare costlier

Press Trust of India  |  Srinagar 

Telephone bills, and services, business-class air travel and sale of newspaper space for advertisements will become costlier in the upcoming regime but education and healthcare will continue to be exempt from

The all-powerful Council today finalised rates for services under the new regime set to kick in from July 1, earmarking an 18 per cent rate for telecom and financial services, which include and insurance, up from current 15 per cent.

Though the insisted that incidence will be same as the current if telecom companies claim input credit, industry associations said adding that as a principal is billed in actuals to consumers and any increase in incidence will result in rise in cost to them.

Briefing reporters after the two-day meeting, Minister said transport services will be taxed at 5 per cent leading to a small drop in the economy class air travel which currently attracts 6 per cent service

Non-AC train travel, including on local trains and metro, as well as religious travel, including Haj yatra, will remain exempted from

Five per cent rate will also apply on rides from cab aggregators like Ola and Uber, which currently pay 6 per cent

AC train travel will attract 5 per cent service tax, same as freight levy.

The Council finalised four rates of 5, 12, 18 and 28 per cent for services, including telecom, insurance, hotels and restaurants, under the biggest 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 (GST) regime from July 1.

Space selling for advertisement in newspapers will attract 5 per cent levy under the It is exempted from currently.

Jaitley said telecom and financial services will be taxed at a standard rate of 18 per cent.

Revenue Secretary Hashmukh Adhia insisted that the incidence on telecom services will be unchanged at 15 per cent after the input credit is taken on equipment.

But Cellular Operators Association of India (COAI) Rajan Mathews said: "You have to differentiate between impact of on companies and consumers. Companies may or may not structure their tariff as per provision of refund but customers will have to pay 18 per cent everytime bill is generated so consumers will be hit under the "

While the economy class air travel will attract 5 per cent GST, the business class will be charged at 12 per cent.

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

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

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

While the rate proposed for cinema halls is lower than 40 to 55 per cent currently, 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 the The rates for hotels with tariff of Rs 1,000 to Rs 2,000 per day would be 12 per cent, while those with Rs 2,500 to Rs 5,000 would be 18 per cent. The for hotels with tariff above Rs 5,000 will be 28 per cent.

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

The rate on services was the main thing discussed at the meet today, he said, adding that most service exemptions will be grandfathered and will continue.

The net effect of the will not be inflationary, he said, adding that healthcare and education services will continue to be exempted from under the

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

No decision was taken on rate on lottery.

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

Adhia warned the industry of changing rates before the rollout saying that under the anti-profiteering law, any entity can be called in to question for their actions after today.

"My advice to all the big industry players would be that please don't do this. Let's be honest, let us try to pass down the actual rate to the consumer and let's not try to increase tariff only because of rate going up," he said.

The machinery for anti-profiteering will be operationalised soon, he said.

He said once the anti profiteering machinery is set up, balance sheet of companies can be checked if any undue profit has been taken or any benefit has not been passed on.

"We will look only at big companies. The department can suo motu take action," he said.

Jaitley said, "As I said, we made sure that consumers don't have to pay more. The net effect of goods and services is not going to be inflationary because, once the system of input credits starts the actual incidence is going to be positively impacted."

He said transport, covering goods, road, air and AC rail, has been kept at 5 per cent category because its main input is petroleum products and since petroleum is outside the GST, those paying service will not be able to take the benefit of input credit.

"The services have been split into 12 and 18 per cent and some 5 services into 28 per cent category," he said.

Jaitley said most of the work relating to rollout has been completed and only a few things remain.

The two-day meeting of the all powerful Council, its 14th so far, has decided on rates to be levied on various services under the regime.

The has been billed as the biggest reform since the Independence and seeks to have uniform taxation for various goods and services across the country, uniting it as a single market by subsuming a plethora of state and central levies.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 19 2017. 21:32 IST