GST Rates for Goods and Services | Exempt Items | Services under Reverse Charge

GST Council Approves- ‘GST Rates for Goods and Services’, Exempt Items, Services under Reverse Charge

The GST Council, in its meeting held at Srinagar on 18 and 19 May 2017, has decided on many significant aspects for GST roll-out w.e.f. 1 July 2017, like finalisation of GST Rate Schedule for Goods and Services, Exempt Items, Services under Reverse Charge, etc. Besides, classification of services is under progress, in line with proposed multi-tiered rate structure.

Now it seems that GST roll-out from 1 July 2017 is practically possible as the GST Council has successfully mitigated the major uncertainty factor with finalisation of GST Rates for Goods and Services, exempt items and services under reverse charge, etc. We can hope that all open issues will be resolved and GSTN functioning will support smooth transitioning within the given deadline. Professionals and other Stakeholders need to get ready and gear up for the migration process.

There is mixed response from the Industry on the GST Rates Schedules for Goods and Services recently approved by the GST Council. In general, the demands and expectations of the Industry and Professionals have been met and their response is quite positive.

The GST Rates Schedules for Goods and Services as approved by the GST Council, indicates that the balancing job has been done nicely, i.e. reducing tax impact for common man while maintaining status quo on tax rates for goods and services of mass consumption.

With final rates of GST in hand, we can say that tax cost will go up in some cases as compared to present tax rates, like telecom, insurance services, etc. where tax rate is 18%; home appliances, automobiles, luxury hotels, cinema, etc. where tax rate is 28%; and sweetened aerated/ flavored water where effective tax rate is 40% (28% tax rate and 12% cess).

On the other hand, there are certain sectors which will be benefited, like education, healthcare, etc. which have been exempted from GST; transportation services, life saving drugs, budget hotels, economy class air travel, cab aggregators, etc. will get advantage of lower tax rate at 5%.

It may be noted that Budget Hotels with daily tariff of upto Rs 1000 have been exempted from GST, however in the case of daily tariff between 1,000-2,000; 2,500-5,000 and above 5000 tax rate would be 12%, 18% and 28% respectively. Similarly, Non-AC and AC restaurants will attract tax rate of 12% and 18% respectively.

The construction sector will get benefited from simplification of indirect taxes. The works contracts will be taxed at 12% with allowance of full input tax credit.

FM Arun Jaitly has said that there is no increase in overall tax for any of the items, while tax rate has been brought down consciously on several commodities. He asserted that there will be an overall reduction in tax incidence on commodities and services.

Chapter-wise ‘GST Rates Schedule for Goods’

The GST Council has approved GST Rates for more than 1200 commodities, except few items which are state specific. Accordingly, the GST Rate Schedule for Goods (Chapter-wise) has been uploaded by the CBEC, however the same is subject to further vetting and may undergo minor changes in due course.

GST rate have been fixed for 1211 items of which 7% will be exempted, 14% will fall in the 5% slab, 17% in the 12% slab, 43% in the 18% slab and 19% in the 28% slab, i.e. 81% items will fall in 18% or below slab and only 19% items will fall in 28% slab.

Download pdf copy of the Schedule of tax rates for Goods under the GST Regime, as approved by the GST Council on 18 May 2017, as under:

Chapter-wise GST Rate Schedule for Goods Approved by GST Council on 18 May 2017

GST Rates Schedule for Services

The GST Council has approved GST Rates for Services. The Council has broadly approved multi-tiered GST rates structure for Services, as against existing uniform rate of 15% service tax. Now the Services will be subject to tax under GST at slab rates of 5%, 12%, 18% and 28%. Accordingly, the GST Rate Schedule for Services has been uploaded by the CBEC, however the same is subject to further vetting and may undergo minor changes in due course.

Introduction of multi-tier rate structure for services, like in the case of commodities/ goods, is in line with the uniformity approach of the GST indeed, however fine tuning of the classification norms is much required, to avoid complexities in compliance and litigation due to interpretation issues.

For pushing higher GST rates, a new concept has been identified as “luxury services”. Overall, marginal increase in the GST rate on services is unlikely to build inflationary pressure, as the additional credits of input tax will nullify the impact.

Download pdf copy of the Schedule of tax rates under GST Regime for Services, as approved by the GST Council on 19 May 2017, as under:

GST Rate Schedule for Services as Approved by GST Council on 19 May 2017

List of Exempt Services under GST Regime

The GST Council has also finalised a list of 83 Exempt Services under the GST Regime, maintaining status quo on existing exempt services to avoid any adverse impact.

Download pdf copy of list of exempt services under GST Regime, as approved by the GST Council on 19 May 2017, as under:

List of Exempt Services as Approved by GST Council on 19 May 2017

Proposed Scheme of Classification of Services under GST

In view of introduction of multi-tiered tax rate structure for services under GST, the CBEC has drafted proposed scheme of Classification of Services. The same is presently under consideration of the GST Council, as under:

Proposed Scheme of Classification of Services under GST Regime

List of Services under GST Reverse Charge

The GST Council has approved a list of 18 Services under Reverse Charge Mechanism, with indication of proportion of applicable of GST payable thereon by the recipient of services thereof.

Download pdf copy of the List of Services under GST Reverse Charge, as approved by the GST Council on 19 May 2017, as under:

List of Services under Reverse Charge as Approved by GST Council on 19 May 2017

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