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The government said on Tuesday that there will be two slabs for services under GST, with segments such as transport facing a lower levy compared to the 18% tax on several services.
While a decision on the rates would be taken by the GST Council, comprising Union finance minister Arun Jaitley and state FMs, revenue secretary Hasmukh Adhia said that services such as transport, where fuel was a major component, could face a lower levy, with tax practitioners talking of a 12% tax on such services. “The abatement rate has to be factored in and there can be more than one rate,” Adhia told reporters.
Currently, on several services, only a part of the fee is treated as service. For instance, when it comes to goods transport, service tax is levied on 30% of the bill. Currently, service tax is pegged at 15% but the actual levy in several categories is much lower. Two Rates for Supply of Services under GST is on the cards .
Apart from being a service where the main input, petrol and diesel have been kept out of the GST net, transportation is a key service for the economy and a steep rise in the levy will push up transportation costs for the economy.
“Wherever public interest is involved, the government will have to ensure that the actual incidence does not rise much. This will include railways, construction, and restaurants,” said service tax lawyer R S Sharma. Although petroleum products — from crude to petrol, diesel, natural gas and aviation fuel — are currently out of GST, Adhia told reporters, there will be an annual review and the GST Council will decide amid indications that the Centre will seek to include the key revenue generator.
He said that once the new indirect tax regime is rolled out, the incidence of tax on imported goods would be the same as on the locally manufactured items. Imported goods, he said, will be subject to Integrated GST (IGST) for which credit can be claimed at the time of sale. IGST is just an interim tax or a washout tax which is equivalent to the GST rate on a specific product. In a case of locally manufactured goods, a similar GST rate will be applicable and hence, there will be no advantage for the imported goods. The government levies countervailing duty (CVD) and special additional duty (SAD) on imported goods to protect domestic manufacturers.