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Home Business

Services sector could be GST Council’s Achilles heel from July 1

By M Rajendran  |  Express News Service  |   Published: 18th June 2017 12:30 AM  |  

Last Updated: 18th June 2017 07:21 AM  |   A+A A-   |  

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NEW DELHI: Services across the country will continue to be the Achilles heel for the GST Council under the new indirect tax regime to be rolled out from July 1.

The four-tier rate structure for services finalised by the Goods and Services Tax Council for taxing services are five percent, 12 per cent, 18 per cent and 28 per cent, as against the existing 15 per cent.

“The decision seems to be aimed at expanding the service tax net and brings those not currently under it and pay one rate of tax,” said senior economist Amir Ullah Khan.

Industries with issues on the tax to be imposed have continued to make representations to the GST secretariat. “We have been getting numerous requests and we are examining each of them,” said a senior official in the GST Council.

For instance, the highest rate of 28 percent on services like entertainment events, theme parks, race courses and five-star hotels is still being contested.

The Indian Association of Amusement Parks and Industries (IAAPI) has pleaded that the new taxation announced equates the industry with casinos, betting and race courses and completely overlooks the essential role played by the industry in creating social infrastructure and attracting tourism.

“…We would like to urge the government to treat our industry at par with hospitality and restaurants which fall in the GST slab of 12-18 per cent,” said Ashok Goel, promoter, Pan India Paryatan Pvt. Ltd., in a statement.

While the government proposes to impose 12  per cent tax for non-ac restaurants and 18 per cent for AC restaurants, the council has done well to keep railways, road and air transport and cab aggregators in the five per cent tax bracket, which would help in lowering the cost of travel and goods.

Another positive move is not to tax the rental income from properties used for residential purposes under the GST regime. Further services like educational institutions and healthcare services too have been exempted.

However concerns remain on sectors like insurance services. This is a critical area and the GST Secretariat has received several representations from stakeholders.

“GST implementation has to be done sensitively keeping in mind the inherent nature of insurance business… Considering the low penetration of insurance in India, Micro Insurance (by regulator definition) or certain instances below a threshold need to be exempted from GST,” Joydeep K Roy, partner and Leader- Insurance, PwC India said.

Concerns are also aired by Information Technology, telecom and financial services that will attract 18 per cent tax under GST.

“A 12 per cent GST would have been ideal and would have benefited the customer and businesses,” pointed out Aniketh Jain, CEO & Co-founder of Solutions Infini.

The debate on whether the tax rate is higher or lower for services will continue. But, the critical challenge for success of GST in services would depend on the flexibility of government, for the initial 12 months after rollout.

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