Four tax rates will apply to services such as telecom, hotels and transport under the Goods and Services Tax (GST) regime that is targeted to kick in from July 1, Finance Minister Arun Jaitley announced after the meeting of the GST Council, a body of 32 state finance ministers that he heads.
Services will be taxed under the multi-tier structure as goods; the council has fixed slabs at 5, 12, 18 and 28 per cent.
Most transport services have been taxed at 5 per cent, telecom and financial services will attract 18 per cent tax but healthcare and education have been exempted.
According to the tax slabs approved by the council, small restaurants would be taxed at just 5 per cent. But the rate progressively goes up, to 12 per cent for restaurants without an air-conditioner and a peak of 18 per cent for those an air-conditioner or a liquor licence. The tax on room tariff, similarly starts with 5 per cent for tariff above Rs. 1,000 and rises up to 28 per cent for five-star hotels.
Overall, Mr Jaitley said the net effect of Goods and Services Tax will not be inflationary. The government on Thursday kept basic food items out of the tax net, processed food items will be charged between 12 and 28 per cent.