Impact of GST on Services
July 3, 2017 . 212 views
It’s a mixed bag when it comes to services where one needs to shell out a little more on some while saving on some others
1. Services like banking, life insurance products, mutual fund products as well as your telecom bills will cost more
• Currently, you pay a service tax of 15% on services like banking as well as the premium you pay on your life insurance policy; going forward this is set under GST @18%. Hence, be ready to shell out an amount of 3% extra
• The service tax payable on banking services was also at 15% (including the various Cess), now this has been increased to 18% under GST
• A service tax is levied on mutual funds services, which is typically proportioned in the Total Expense Ratio of your fund. This tax has gone up from 15% (service tax) to 18% under GST
• Paying more for your phone bill – On a mobile bill of Rs. 1,000, you previously paid 15% service tax i.e. Rs. 150, hence a total of Rs. 1150. With this being replaced by GST @18%, this amount will go up to Rs. 1180
In the end, companies do strive to give their consumers maximum value, so there’s likely to be some adjustments made from their end to help ease the sting of 3% extra tax for you.
2. Flight tickets to cost less – time to plan that holiday post-July, maybe?
• Economy class air travel will become cheaper with the tax rate fixed at 5% under GST against the existing 6% tax rate
• However, for those travelling business class, tickets will become more expensive as the tax will go up from 9% to 12%
• 3. Movie buffs are going to feel the pinch as cinema has been classified as a luxury spend, just like going to a 5-star hotel
• In line with this, the GST rate for movie tickets has been set @28%
• With In the past, cinema halls paid a service tax of 15 % (primarily on food) along with an entertainment tax of about 28 %, the new tax slab seems really high to many considering no benefit has been given to them
• Also, the entertainment tax varies from state to state, in Maharashtra, for instance, it is at 50% while in Karnataka it’s at 30%. Another thing that affects the overall spend here, is that some properties receive tax exemption in the first few years, lowering their total tax
• Hence, a blanket tax rate of 28%. The tickets more expensive in some states than the others
4. Eating out and hotel stays
Eating out in an AC restaurant to cost the same
• You currently you pay VAT @12.5% and Service Tax @6% on the total bill, which comes up to about 18.5%. The GST rate of 18% may not change your pay out much
Eating out in a 5-star hotel, however, will cost you more
• Currently, you pay VAT @12.5% and Service Tax @6% on the total bill, which comes up to about 18.5%. The GST rate of 28% is sure going to cut down the number of posh parties that happen at the Taj.
The overall tariffs for premium hotels (four-star and above) may see an increase
• You currently pay 10% as state tax and 9% as central tax i.e. total 19% for these hotels. Under GST, the standard rate of 28% will mean that you’re going to be spending a lot more on anything premium.
Get unlimited investment tips.