GST in action: New Rates finalized but exempted education and healthcare

NEW DELHI: Union Finance Minister Arun Jaitley on Friday said that the Goods and Services Tax (GST) Bill, which is to exempt the daily-use commodities from the levy, is going to be more efficient and a consumer friendly taxation system.


Education and healthcare will continue to be exempt from taxation in the upcoming Goods and Service Tax (GST) regime that will tax services at four different rates with transport, including economy class air travel, being taxed at 5%.

The GST Council finalised four tax rates of 5%, 12%, 18% and 28% to apply on services including telecom, insurance, hotels and restaurants under the biggest tax reform since the Independence.

The rates are in line with those finalised for goods.

With this, rates of all items except a handful including gold, have been decided ahead of the roll out of the GST regime from July 1.

Transport services will be taxed at 5%. This rate will apply to cab aggregators like Ola and Uber as well as those who currently pay 6% tax.

Non-AC train travel will be exempt and the 5% will be levied on AC travel tickets.

Travelling on metro, local train and religious travel including Haj yatra will all continue to be exempt from GST, Revenue Secretary Hashmukh Adhia said.

Economy class air travel will attract 5% GST, while business class will be charged 12%, he said.

Jaitley said non-AC restaurants will charge 12% GST on food bill. Tax rate for AC restaurants and those with liquor licence will be 18%, while 5-star hotels will charge 28% GST.

Restaurants with Rs 50 lakh or below turnover will go under the 5%, he said.

Work contracts like white washing will be liable for a 12% GST.

Entertainment tax will be merged with service tax under GST and a composite 28% levy charged on cinema services as well as gambling or betting at race course.

While the rate proposed for cinema halls is lower than 40 to 55% as per current incidence, it may not result in a reduction in tariffs on cinema tickets as states continue to hold right to levy local charges on them.

Hotels and lodges charging per day tariff of Rs 1,000 will be exempt from GST. Rate for hotels with tariff of Rs 1,000 to 2,000 per day would be 12% while those with tariff of Rs 2,500 to Rs 5,000 would be 18%.

GST for hotels with tariff above Rs 5,000 will be 28%.

Jaitley said tax on gold and precious metals will be taken up at the next meeting of the Council on June 3.

The net effect of GST will not be inflationary, he said, adding that healthcare and education services will continue to be exempted from tax under GST.

E-commerce players like Flipkart, Snapdeal will have to deduct 1% (tax collected at source) while making payments to suppliers, the revenue secretary added..

Briefing reporters here after the two-day meeting of the Council, Finance Minister Arun Jaitey said telecom and financial services will be taxed at a standard rate of 18%.

However, the telecom industry expressed disappointment at the 18% GST rates, saying it will ‘stress the already bleeding balance sheet of the sector’.

“It will augment the existing burden of the industry further. This is also likely to slow down the planned rollout of infrastructure across the country and will have an impact on flagship government initiatives like Digital India, cashless India and others,” said Rajan S Mathews, Director General, Cellular Operators’ Association of India (COAI) while speaking to Zee News.

Matthews added that as an essential service, thetelecom industry needs some benefits and tax relaxation in order to provide a seamless and hassle-free service. The industry has worked tirelessly and has fulfilled its motto of connecting everyone till the last mile connectivity..


With renewables tariff already touching new lows, Power Minister Piyush Goyal said there was no need for lower taxes to encourage clean energy and the GST regime will have no impact on power rates.

However, the minister is hopeful that lower GST rate of 5% on coal, compared to existing 11.69%, would help discoms provide power at affordable rates.

“The coal sector will also benefit (due to GST) with straight away benefits to consumers because (higher) taxes used to be a burden on consumer of India. I am delighted that the GST council has chosen to keep coal at 5 per cent slab. I am sure that this will help discoms serve the poor and rural consumers with more affordable rates,” Goel said

About taxes on power equipment he said, “As far as power equipment is concerned, this government has been able to maintain the power prices at affordable levels and in fact, reduced it in most cases. NTPC has been able to bring down their variable cost by 20 per cent.

The GST will be rolled out on July 1

With Agency Inputs