We all know Rome wasn’t built in a day. Neither was the Goods and Service Tax Model. GST is not only the largest tax reform since independence but it is also one of the few laws that have taken so long to come into existence. It’s been 17 years since the idea was first coined, and finally GST is inching closer to reality. After much brainstorming, abundat parliamentary sessions and quite a few arguments the final GST rates are out. Hurray!
The Council and the Government has decided on the following tax slabs for goods – 0%, 5%, 12%,18% and 28%. While there are five slabs for goods, the services will fall in either of the two slabs of 12% and 18%. Certain goods and services like aerated drinks and tobacco products will attract tax at 28% alongwith an additional cess. On 18th May this year the GST Council categorisied 1211 items under the various tax slabs.
The two-day meeting at Srinagar was held primarily to decide the classification of commodities and services under the different tax slabs. The council has achieved this feat and how! In the two day meet, the council has successfully classified 1211 items, decided to exempt 83 services from the ambit of taxations and set a 5% concessional GST rate for 13 other services. Tabulating services has always been difficult. Service Tax was introduced with the Finance Act 1994. At the time of inception there were only three services liable to be taxed. When the number of taxable services increased, the government came up with a smart move – the Negative List. Services listed under the negative list don’t satisfy the definition of services and therefore are not liable to be taxed . On the other hand, over the years, the service tax base has widened through the negative list based approach. Apart from services that are specifically excluded, all other services are liable to tax. There are certain items which are liable to tax but have been exempted from the same. These items are included in the Mega Exemption List.
The services which were previously exempted will continue to be so under GST as well. The services provided by the Goods and Service Tax Network (GSTN) have also been added to the exemption list. The GSTN will basically provide the IT infrastructure for the Centre and the states. Transport of goods by rail, transport of passengers, other than sleeper class and supply of tour operator’s services are among the 13 services that will attract a concessional 5% GST. However, input tax credit may not be available for some of these services. A tax rate of 12% will be levied on business class air travel and construction services among other services. A considerable chunk of services including seven specified services such as work contracts and outdoor catering of food and drinks as well as other services not mentioned in the schedule will be taxed at 18%. Five services will attract a 28% tax and a full input tax credit can be availed on the same.