Legal Services, Education, Health are Tax Free Under GST: All You Need to Know about GST Rates on Services

Services

The GST Council on Friday decided the rate of tax for goods and services under the Goods and services Tax (GST), the new indirect tax reform which is to be implemented on July 2017.Moving a step closer to the deadline, the Council finally agreed on 4 tier tax system for services having 5%, 12%, 18% and 28% of tax instead of the current uniform rate of 15%.

A list of services categorized under the four slabs is below;

Tax Free services

Most of the services enjoying tax exemption under the current service tax mechanism will continue the same under the new tax regime. Hotels and lodges charging rent below Rs. 1000 are exempted under the GST. Services by Government, Local authorities, services by RBI, educational institutions, services by way of slaughtering animals, insurance services, services provided by an incubate etc are exempted under services. Services provided by Lawyers, Senior Advocates and Law Firms to any person including a business entity having a turnover of below 20 lakhs are exempted from GST.

5% GST

Restaurants with an annual turnover of less than Rs 50 lakh will fall under the 5 percent tax slab, Transport of goods by rail, by air, by vessel from outside India upto the customs station, Transport of passengers by rail (other than sleeper class),by air (economy class), by air-conditioned carriage other than motor cab, radio taxi etc. are taxable at 5% GST. Supply of Tour operators service, selling of space for advertisement in print media, service by way of job work in relation to printing of news papers are also in the list.

12% GST

12% GST is fixed for non-ACs food hotels, Hotels/lodges with a room rate between 1000-2500, Work contract services,transport of goods in containers by rail byany person other than Indian railways, transport by air other than economy classes, Services of Foreman of Chit Fund, construction of commercial building/complex etc, temporary transfer or permitting the use of enjoyment of an intellectual property etc.

18% GST

Air-conditioned restaurants with liquor licences, supply of food/drinks in outdoor catering, renting of hotels/inns/lodges/guest house where room tariff is between 2500-5000, services by way of admission or access to circus, Indian Cassical dance etc, will be taxed at 18% of GST under the new Act.

28% GST

Higher tax rate of 28% will be levied for luxury hotels. Five star and luxury hotels, Services related to gambling, race club betting and cinema halls, admission to entertainment events or access to amusement facilities etc.

All other services not specified elsewhere in the schedule shall be taxable at 18% of GST.

Applicability of RCM under GST

Certain services provided in the list are taxable under the reverse Charge Mechanism (RCM). As per this mechanism, the service tax on specified services can be collected directly from the service recipient instead of assessing the service provider.Under the GST regime, services by Arbitral Tribunal, Sponsorship services, certain sevices provided by the local authorities, services provided by a Director to a Company or a body corporate, services of insurance agent to his Company, services of a recovery agent to a Banking Company, online radio taxi or passenger transport services etc., are taxable in the hands of the service recipients.

In case of services provided by Lawyers, Senior Advocates and Law Firms to a business entity having above 20 lakhs turnover, GST is applicable on RCM basis.

Read the Complete Chart below.


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