The GST Council finalized four tax rates of 5, 12, 18 and 28 percent to apply on services including telecom, insurance, hotels and restaurants under the biggest tax reform since the Independence.
Education and healthcare will continue to be exempt from taxation in the upcoming GST regime. The rates for services are in line with those finalized for goods. The rates will be applicable from July 1 with the implementation of the Goods and Services Tax (GST) regime.
Briefing reporters after the two-day meeting of the Council, Finance Minister Arun Jaitey said telecom and financial services will be taxed at a standard rate of 18 percent. Transport services will be taxed at 5 percent and will apply to cab aggregators Ola and Uber as well.
Non-AC train travel will be exempt from tax while AC train travel and Economy class air travel will be taxed at 5 percent. Business class air travel will be charged a higher rate of 12 percent.
Jaitley said non-AC restaurants will charge 12 percent GST on food bill. Tax rate for AC restaurants and those with liquor licence will be 18 percent, while 5-star hotels will charge 28 percent GST.
Entertainment tax will be merged with service tax under GST and a composite 28 percent levy charged on cinema services as well as gambling or betting at race course. Cinema tickets may not get cheaper as the states still hold the right to levy local charges on them.
Hotels and lodges charging per day tariff of Rs 1,000 will be exempt from GST. Rate for hotels with tariff of Rs 1,000 to 2,000 per day would be 12 percent while those with tariff of Rs. 2,500 to Rs. 5,000 would be 18 percent. Hotels with tariffs above Rs. 5,000 will be charged 28 percent
It is expected that the implementation of GST will not have an inflationary effect on the economy.