The nationwide Goods and Services Tax (GST) will be launched today at the Central Hall of Parliament in a midnight event which will be attended by eminent personalities including Prime Minister Narendra Modi and President Pranab Mukherjee. The historic reform will subsume at least half a dozen state and central taxes and will replace with a single nationwide GST. The GST tax rates of 0 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent will affect the prices of hundreds of items. While some of the goods and services will see a dip in their prices, some will cost more after July 1.
While most of the food and household items have been kept under lower tax brackets of 0 or 5 per cent, luxury and sin items fall under 28 per cent tax slab. The GST will also replace the existing service tax. Essential services like education and health have been exempted under the GST but most of other services have been kept under 18 per cent tax bracket.
Train passengers will have to pay a bit more to travel AC and first class. The GST rates on such tickets has been fixed at 5 per cent which will replace existing 4.5 per cent service tax. Service tax is levied only on AC and first-class travel fares in the Railways so ticket prices for general or sleeper coaches will not be affected. For first class, if a ticket costs Rs 2,000, a passenger will now have to shell out Rs 2,010.
GST rate on economy class air travel has been lowered to 5 per cent from the previous service tax rate of 6 per cent while that on business class travel has been raised to 12 per cent from existing 9 per cent service tax. So in effect, travel on economy class is set to get cheaper while that on business class will get costlier.
Transport services will be taxed at 5 per cent from existing 6 per cent tax which will make your Ola and Uber rides cheaper.
Under GST, small hotels and restaurants and dhabas with an annual turnover of up to Rs 50 lakh will be taxed at 5 per cent. On the other hand, 12 per cent GST rate is applicable on low-budget and non-AC restaurants, while most of the establishments will fall under 18 per cent tax slab. The 18 per cent GST rate will replace existing service tax and the VAT. While service tax was fixed at 5.6 per cent (since restaurants provide both goods and services), VAT varied from state to state from 12 per cent. If a state charged 14.5 per cent VAT on restaurants, the effective tax was 20.1 on your bill, which will now be replaced with 18 per cent.
However, if a state charged 12.5 per cent VAT (like Delhi), the existing effective tax of 18.1 per cent will be replaced with 18 per cent GST rate, not leaving much of an impact on your bill. However, states where the VAT is lower (in Maharashtra, 5 per cent on small restaurants, 8 per cent on restaurants having turnover of sales Rs 3 crore and more), eating out will cost you much more from tomorrow.
The impact of GST on your stay at a hotel will depend on the type of establishment. Currently, hospitality industry pays tax in the range of 18-25 per cent, depending on the state and the type of services. Staying at non-luxury hotels will cost you less after GST but 5-star hotels will cost you more. Hotels and lodges that charge Rs. 1,000 a day or less are exempted from the GST, while those charging from Rs. 1,000 to Rs. 2,500 will be taxed at 12 per cent. The GST rate of 18 per cent will apply on hotels with room tariffs between Rs 2,500 and Rs 7,500.
Five-star hotels and rooms with tariffs of Rs. 7,500 and above will come under 28 per cent GST rate slab.
Telecom services have also been put in the 18 per cent GST slab so your telephone, mobile or broadband bill will be a little higher from the next month against a rate of 15 per cent currently. Though the government insists that tax incidence will be same as now if telecom companies claim input tax credit, industry associations said that passing on the benefit of the input tax credit will result in a loss as a principal is billed in actuals to consumers and any increase in incidence will result in a rise in cost to them.
Credit card services have been kept under 18 per cent tax slab. Credit card providers have already alerted their customers that the existing 15 per cent service tax will be replaced by 18 per cent under the GST. Since tax is levied only on credit card dues, there will be a little increase in your bill amount from tomorrow.
Financial and banking services have been kept under the 18 per cent slab under the GST. Wherever applicable, these charges will be hiked by 3 per cent.
Term insurance and health plans fall under 18 per cent GST. Currently, these are liable to pay 15 per cent service tax. Tax on Traditional/Endowment policies and single premium plans will also increase after the GST is implemented.
Some states currently charge entertainment tax on DTH and cable services. These services are also liable to pay 15 per cent service tax. Since the GST will subsume all these taxes and charge only 18 per cent tax, prices of these services are expected to come down.
Cost of movie tickets change from state to state, depending on the entertainment tax that ranges from zero to 110 per cent. For cinema tickets costing Rs 100 or less, the GST is 18 per cent while tickets costing above Rs 100 will come under 28 per cent GST. So depending upon the state you live in, your cost of entertainment will vary.
The GST will be launched at 12 am tonight from the Central Hall of Parliament. If you haven’t planned your next month’s budget according to GST, you have only a few hours left.