The apex body along with the responsible team of ministers and tax officials will be organizing a meeting to discuss and finalize the service tax under the GST. The council has already decided a multi-tier rate structure but the classification of the taxes will be held over the service sector to the priority. The major responsibility of the committee is to seek a better way to adjust the tax rate as to keep down inflation and prices as low as possible.
The committee is, however, concerned about the overall tax fitment which will hold on 18-19 May discussing most of the tax rates rounded to be finalized. The official mentioned that “The fitment committee will start with deciding on tax rates on services. Since the Centre alone has the power to levy service tax under the current regime, fixing of the tax rate on services would be an easier task.”
The official mentioned that, while many services in which both VAT and service tax implies can be adjusted towards a standard rate of 18% while on the other side 12.5% VAT applicable services can be brought down to 12%. In the same case, logistics and transportation industry can see a 12% service tax. The officials said that “While it is given that there will be some impact on inflation, to begin with, but in 6-8 months as companies analyze the GST impact on sales and start passing on the benefits of tax rate reduction to consumers, inflation would come down.”
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Nangia & Co-Director (Indirect Taxation) Rajat Mohan mentioned that “We expect going forward this rate of tax would increase to 18%. This will give rise to a marginal increase in budgets vis-a-vis your phone bills, internet bills, professional services, consultant services, rent on commercial buildings, the supply of manpower, cosmetic surgery, interior decorator services, security agency services, etc.”
Some of the service sectors which are currently managed at a very low tax rates are 15% in transportation of goods or passenger by Indian railway at 4.5%, service or in the supply of food in restaurants, hotel (10.5%), transportation of goods by transportation agency or radio taxi at (4.5-6%), tour operator services (9%), construction of complex (4.5%), economic class air- fare (6%), business class airfare (9%). All these are proposed to be under the 5 or 12 percent of tax bracket and not to be in the 18 percent bracket.
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