Service Tax may shoot from 15% to 18% under GST: Hasmukh Adhia

New Delhi, Apr 13 (KNN) Service sector is likely to attract a higher tax rate of 18 per cent from the current 15 per cent once the GST is implemented, this will result in services becoming slightly more expensive, Revenue Secretary Hasmukh Adhia has said.

However sectors such as the healthcare, education and agriculture are likely to remain exempted. “Whatever is in the present exempt list, we will try to continue it. We wold recommend this to the Council and it will take a view on it. Our attempt is not to upset too many things in one go” he said.

At present the services sector is taxed at around 14 per cent, with two additional cesses - the Swachh Bharat Cess and Krishi Kalyan Cess rounding the tax burden to almost 15 per cent.

According to the GST law, the agriculturalists who employ themselves or their family members, will not come under the GST even if their annual turnover is over 20 Lakh. On the other hand, those who employ persons and have an annual turnover of over 20 lakh will have to register for the GST. Currently agriculture including sericulture, floriculture, dairy, horticulture, fishing that usually employ outside labourers on a large scale are exempt from service tax as they come under agriculture. But whether these will attract tax under the GST is still debatable. "Those who are dealing in anything except what we have defined as 'agriculturalist' will have to register (under GST). But whether their products are taxable or not will have to be decided by the Council," the Secretary added.

According to a media report, Adhia further told that the final exemption list is yet to be decided, it will be complied and decision will be taken by the Council separately.

He also informed that the services that currently have less than 15 per cent tax rate may attract lower rates. "Wherever the services at present attract lower than 15 per cent rate of service tax because of certain reasons, we will try to maintain that. Transport sector, for example, attracts lower than 15 per cent tax right now. We will put these in either 5 per cent or 12 per cent," he said.

The Revenue Secretary further stated that since petrol and petroleum products have been kept zero-rated under the GST regime, transport can be a good candidate for 5 per cent tax rate.

In terms of goods, Adhia said that whatever is the exact incidence of excise plus VAT, the fitment will be into a tax slab closer to that. Depending on whether the goods are put in the higher slab or the lower slab, the taxes may increase in a few cases. "Most of the items will be as per formula, only a few items will need discussion. In a few cases, the taxes may increase, but not in all cases. Every year, the Council will meet and revise rates," he added.

Commenting on the ongoing debate regarding the implementation dates of the GST, Adhia exhorted that the government is determined to roll-out the GST from July 1 despite some industry stakeholders demanding further postponement of the new tax policy.

Earlier in the day the GST got final nod by the President after it was passed in both the houses of the parliament. (KNN/ DA)