GST Reform: Placing services under four rate slabs is a paradigm shift
The tax on goods and services (GST) tax reform more critical than India wants, the time intended to become a reality. With the completion rate and most of the rules, Finance Minister Arun Jaitley reiterated on July 1 will be the date of implementation of the revolutionary tax law.
However, the advertised service fee structure seems to cause dread in the minds of service providers and recipients.
Under the GST system, services will be taxed at rate four tablets at 5%, 12%, 18% and 28%. This multiple rate structure is a paradigm shift from the current system, which taxes services at a single rate of 15 percent. The reason for this change is apparently to ensure that different economic classes are not subject to tax at the same rate.
Given the nature of the services, several exemptions currently apply. For example, services provided by educational institutions and health services licensed clinical, medical and paramedical facilities were exempt from GST.
Services such as freight transport by cab air aggregator services, by road and rail and remained on the slab at 5 percent. The categorization of these services at the lowest rate slab was carried out taking into account that their main contribution is oil, which is outside the GST and a credit of the same will not be available.
Restaurants without air conditioning or central heating and without liquor license will be below the 12 percent tax level, while those with these items will be taxed at 18 percent. Construction services related to a complex building or civil structure to sell to a buyer will be taxed at 12 percent. It is interesting to note that currently, beverages and food served in restaurants and work contract activities are generally subject to double taxation of value added tax, in accordance with the respective national legislation as well as the rate Service to a reduced value. A single sample should simplify the taxation of such operations.
Other services that would charge a tax rate of 18 percent include IT services, telecommunications and financial services. A higher rate of 28 percent was imposed on services such as admission to entertainment events, theme parks, race fields, 5-star hotels, etc. The imposition of the GST at 18 percent and 28 percent, a 15 percent increase currently applicable, has been supported by the government, claiming that the additional contribution of funds would be available and that the State-specific tax , As the entertainment tax would be eliminated.
A comprehensive review of the service price guide indicates that the government has sought to strike a balance between mitigating the expected inflationary impact of the GST and maintaining a neutral rate on income. But the four trays can give rise to disputes over the classification of services in the different slabs.
In most cases, a reduction in the incidence of taxes in general was justified either by the social relevance of the service in question or by a reduction in the availability of incoming credit. On the contrary, an increase is supported by the availability of additional entry credits or the luxurious nature of the service.