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GST on Services
Goods and Service Tax on services follows a structured 4-tier rate system, with tax rates set at 5%, 12%, 18%, and 28%. Each tier offers distinct advantages and disadvantages for consumers, impacting the overall cost of services.
While most GST on services fall under these GST slabs, essential sectors such as healthcare and education are exempt from GST, ensuring that these critical areas remain affordable for everyone.
Categorization Of GST on Services Under The 4 GST Slab Model
Tier – I (5% Tax Slab) |
Tier – II (12% Tax Slab) |
| Railways-Transportation of goods, passengers | Air travel (excluding economy) |
| Goods transported in a vessel from outside India | Renting accommodation (Rs.1000-2500 per day) |
| Renting a motor cab without fuel cost | Food/drinks at non-AC restaurants |
| Transport by air | Construction of building for sale |
Tier – III (18% Tax Slab) |
Tier – IV (28% Tax Slab) |
| Food/drinks at restaurants with AC/heating | Entertainment events (amusement, water parks) |
| Outdoor catering | Gambling |
| Renting accommodation (Rs.2500-5000 per day) | Food/drinks at AC 5-star hotels |
| Movie tickets over Rs. 100 | Hotel accommodation (Rs.7501 or more per day) |
Related Read: GST Rates in India 2024
Rates Schedule for GST on Services
1. GST Rate on Consultancy Services
Consultancy services, covering a wide range of sectors such as healthcare, finance, and investments, are subject to a GST rate of 18%. This applies to all consultancy activities, ensuring that businesses and individuals receive professional advice while contributing to the overall tax structure.
2. GST Rate on Professional Services
Professional services, including those provided by legal professionals, chartered accountants, company secretaries, and healthcare providers, are also taxed at an 18% GST rate. This encompasses a variety of services such as legal advice, accounting, and specialized healthcare services, ensuring that these essential services comply with the GST framework.
3. GST Rate for Educational Services
While many educational services provided by institutions are exempt from GST, certain services fall under the tax regime. Notably, training services offered by commercial coaching entities and educational events organized by foreign-based entities in India attract a GST rate of 18%. This approach helps to regulate and maintain quality within the education sector.
Read More: GST on Educational Services
4. GST Rate on Courier Services
Courier services, which include the transportation, collection, and delivery of letters, parcels, and other materials, are classified under the 18% GST slab. This taxation ensures that courier companies contribute to the tax system while providing essential logistical services.
5. GST Rate on IT Services
Information Technology services, encompassing consulting, design, development, and support, are also levied at an 18% GST rate. This category includes various IT functions such as infrastructure management, online content delivery, and technical support, reflecting the growing importance of technology in modern business operations.
Related Read: GST on Construction Services in India 2024
GST on Loans and Advances
Previously, loans were subject to a 15% service tax, but this has now changed to an 18% Goods and Services Tax (GST). This increase has raised concerns among borrowers that the overall cost of obtaining a loan may rise, potentially leading to higher Equated Monthly Installments (EMIs). While the exact impact on EMIs can vary, borrowers worry that the additional 3% tax may lead to an increase in their monthly payments.
However, it’s important to note that GST is only applied to processing fees and additional charges, such as loan processing and prepayment fees. It does not apply to the repayment of the loan principal or interest payments. Therefore, while borrowers may be concerned about increased costs, the actual impact of GST on loans is minimal, as the principal and interest comprise the majority of the total repayment amount.
GST Rates on Important Loans
Personal loans, home loans, and car loans each carry a GST rate of 18%. Borrowers should note that while this tax applies to certain fees associated with these loans, it does not impact the principal repayment or interest payments.
Conclusion
Staying informed about GST on services is essential for both businesses and consumers, as it directly influences pricing, compliance, and financial planning. For businesses, ensuring compliance with GST regulations is crucial to avoid potential legal issues and penalties. To navigate the complexities of GST, resources such as the DC-MSME Services Booklet and the GST Council’s official site offer valuable information and assistance. By leveraging these resources, stakeholders can better understand GST implications and make informed decisions in their financial and operational strategies.
Frequently Asked Questions
1. How is GST on services calculated?
GST on services is calculated as a percentage of the total service charge, depending on the applicable GST on service for that particular service, which can fall under the 5%, 12%, 18%, or 28% tax slabs.
2. Are all services subject to GST?
While most services are subject to GST, certain essential sectors such as healthcare and education are exempt to maintain affordability in these crucial areas.
3. Which service is exempt from GST?
Healthcare services, educational services, and public utility services such as water supply are exempt from GST.
4. What is the GST rate on professional services?
The GST on services for professional services is 18%, as per the GST rate schedule for various goods and services.
5. What is the exemption limit for GST on services?
The exemption limit for GST on services in India is Rs. 20 lakhs in annual revenue. Businesses providing taxable services below this threshold are not required to register for GST.
6. Who pays the GST on Services?
The GST on services must be paid by businesses and service providers that supply goods or services, while consumers ultimately bear the tax as part of the purchase price.
7. Is GST payable at the GST rate on all products and services?
GST does not apply to all products and services; some items may be exempt or subject to a lower tax rate, depending on their category and necessity.
