May 19, 2017

In a potential good news for the cinemagoers, the GST will subsume present entertainment tax and service tax to replace it with a single 28% tax, Finance Minister Arun Jaitley said on Friday.

Though the rate of tax levied on movie tickets under the new tax regime is at the highest of the four slabs, the concurrent abolition of the entertainment tax, which is as high as up to 45% or even 100% across various states, will effectively make cinema tickets cheaper, Jaitley said after the meeting of GST council, which today fixed the tax rates on most of the services.

Further, the council has fixed a tax rate of 5% on most transport services, lower than expected, in another major relief to the people across the nation. The council decided to keep the tax in the lower bracket for transport services, since most such services, such as air transport and goods transport, use petroleum products as primary input, which is outside the ambit of GST, Jaitley said, adding that those paying taxes on petroleum will not be able to take input credit under this regime. Besides, some transport services, such as railway transport in the lowest category, are exempted from the tax levy altogether, Jaitley said.

Most services, including telecom and financial services, have been fitted into the standard tax rate of 18%, while essential services such as education and healthcare will attract no tax at all.

As for restaurants, those with the turnover of Rs 50 lakh or less could opt to go for a composition with 5% tax rate, Jaitley said. Dining in non air conditioned restaurants would be taxed at 12%, while that in the air-conditioned restaurants or liquor serving restaurants would attract an 18% tax. Restaurants in five-star hotels will be taxed at the luxury rate of 28%, in line with the luxury hotel services, Jaitley said.

Hotels offering with room tariffs up to Rs 1,000 will be exempt from a tax levy, those between Rs 1,000 and Rs 2,500 would be taxed at 12%; Rs 2,500-5,000 at 18%; and Rs 5,000 and above at 28%, Jaitley said.

Yesterday, the GST council, tasked with framing rules for the implementation of most sweeping tax reform India has ever seen since independence, finalised tax rates under the new proposed regime for most of the consumer goods, including items of daily use, eatables, durables, automobiles and more.

Under the new GST regime, 81% of the items have been kept at the lower tax slabs of 5%, 12% and 18%, while exempting from tax essential daily consumption Items including, fresh meat, fish, chicken, eggs, milk, curd, natural honey, fresh fruits, vegetables, flour and bread. On the other hand, certain luxury goods and sin goods would attract a higher tax of 28% and in some cases, also a cess over and above their 28% tax levy. The 12% and 18% tax bracket together account for two-thirds of all items.

[The Financial Express]