GST (Goods and Services Tax) was introduced, in India in the year 2017. It was brought to replace 17 indirect taxes which were prevalent in India at that time, some of them are VAT, Services Tax and Excise Duty. GST was introduced in furtherance to the idea of “One Nation, One Tax”. GST rates are determined by the GST Council, which is a constitutional body under Article 297A of the Indian Constitution. Review of GST rates is done by the Council regularly. Generally, GST rates are higher for luxury items and lower for necessary items. The rates in India are divided into four categories for goods and services as per the HNC and SAC system. After the introduction, GST rates have been revised many times. In this article, we will understand in detail about the updated GST rates for services.
GST Rate Structure in India
Under GST, all the transactions relating to goods and services are classified under either of these two codes:
- HSN code system (for Goods)
- SAC code system (for Services)
As per these code systems, the primary GST rates in India are as follows:
- 0% or nil-rated
- 5%
- 12%
- 18%
- 28%
However, there are a few other GST rates, which are less commonly used such as 0.25 and 3%. Furthermore, for composite suppliers, GST rates are very nominal, which are 1.5, 5, or 6% of their total turnover. Similar to Direct Tax, TDS and TCS are also concepts under GST which are 2 and 1% respectively. Along with these taxes, an additional cess may also be imposed on some items, which are cigarettes, tobacco, aerated water and many more.
HNC System
HNC stands for Harmonized System Nomenclature Code, which was developed by The World Customs Organization. There are approximately 200 countries which use this HNC system for classifying the customs tariffs. The Indian Government also adopted this system because more than 98% of international trade was classified using the very system.
SAC System
Unlike HNC, SAC was developed by the Service Tax Department of India, which stands for Services Accounting Code. It is used for the classification of services in India. As per this system, the services are classified into 5 slabs which are 0, 5, 12, 18, and 28%. As a general rule, if any service is not provided with a GST rate and also isn’t exempted under the GST, then the default GST rate of 18% will apply to that service. Furthermore, GST rates on Services are also classified in the same four-tier structure as Goods. However, the healthcare and educational sectors have been exempted under the GST.
GST Rates on Services
Now that we have understood everything about the structure and rates of GST, we can dive deeper into the GST rates for Services. The GST Council has passed the following rate slabs:
- Nil Rate: It is levied on all the chargeable services offered through the savings account opened under the scheme of PMJDY (Pradhan Mantri Jan Dhan Yojana) and Hotel accommodations which are valued at Rs 1000 or less per day and per unit.
- 5% Tax Slab — This tax slab is levied on the following transactions:
- Working for the printing of newspapers
- Goods transported in a vessel from outside India
- Renting a motor cab without fuel cost
- Transport services in AC contract/stage or radio taxi
- Transport by air (scheduled)/air travel for purpose of pilgrimage via chartered/non-scheduled flights
- Tour operator services
- Leasing of aircrafts
- Print media ad space
- 12% Tax Slab — This tax slab is levied on the following transactions:
- Rail transportation of goods in containers from a third party other than Indian Railways
- Air travel excluding economy
- Food /drinks at restaurants without AC/heating or liquor license
- Renting of accommodation for more than Rs.1000 and less than Rs.2500 per day
- Railway wagons, coaches, rolling stock (without refund of accumulated Input Tax Credit/ITC)
- Construction of building for sale
- IP rights on a temporary basis
- Movie Tickets less than or equal to Rs. 100
- Chit fund services by foremen
- Hotel accommodation for transaction value per unit per day ranging between Rs. 1001 to 7500
- 18% Tax Slab — This tax slab is levied on the following transactions:
- Food/drinks at restaurants with a liquor license
- Food /drinks at restaurants with AC/heating
- Outdoor catering
- Renting for accommodation for more than Rs.2500 but less than Rs.5000 per day
- Hotel accommodation for transaction value per unit per day is Rs. 7501 or more
- Circus, Indian classical, folk, theatre, drama
- Supply of works contract
- Movie Tickets over Rs. 100
- Supply of food, shamiana, and party arrangement
- 28% Tax Slab — This tax slab is levied on the following transactions:
- Entertainment events-amusement facilities, water parks, theme parks, joy rides, merry-go-rounds, race courses, go-carting, casinos, ballet, sporting events like IPL
- Race club services
- Gambling
- Food/drinks at AC 5-star hotels
- Loans and Advances Services — The rate of GST on Loans etc is 18%. The point to be noted here is that the GST is not levied on the repayment or interest payment, it is levied only on the processing and other charges which are paid to the bank or other financial institution. The GST rates on various types of loans are mentioned below:
- Personal Loan – 18%
- Home Loans – 18%
- Car Loan – 18%
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