Lunes, 24 Julio, 2017

India hotels doomed by huge tax hike?

Union Finance Minister Arun Jaitley | PTI Union Finance Minister Arun Jaitley | PTI
Eleena Tovar | 20 May, 2017, 12:09

On Friday, the Council is likely to decide the tax rates of items like beedi, biscuits, footwear, gold, textiles, handloom handicraft and power-driven agricultural equipment.

On the first day, the GST Council categorised 80 to 90 per cent goods and services under the four tax slabs stipulated under the GST Act.

However, SIAM called for a review on the inclusion of 10-13 seat capacity vehicles "used mainly for public transport" in the same tax bracket as luxury cars with a 15 per cent cess duty.

The GST Council finalised 18 percent tax on services rendered by telecom operators against 15 percent at present.

Telephone bills and mobile handset prices will go up from July 1 when the new Goods and Services Tax regime kicks in, raising incidence of taxation on the telecom sector.

He added that banks will now also have to register their branches state-wise under the GST, unlike the current regime when they are registered through the banks' headquarters and this would initially increase the compliance cost for banks.

GST Council has chose to club insurance cover with the financial services sector and tax it at 18 per cent under the GST regime, which will make it an expensive proposition from July 1.

Meanwhile, prices of televisions, refrigerators and air-conditioners would go up by 4-5 per cent as they would fall under the 28 per cent tax slab.

Hotels with tariff under Rs 1,000 have been kept out of the GST, while those with room tariffs between Rs 1000-Rs 2,500 will be taxed at 12%. In case of non-air-conditioned restaurants, the tax rate will be 12 percent.

Aerated drinks and cars will be in the 28 per cent bracket.

Healthcare and education would be exempt from GST. These are usually five-star hotels that would attract a tax rate of 28%.

17 percent items are in 12 percent tax bracket, 43 percent in 18 percent tax slab and only 19 percent of goods fall in the top tax bracket of 28 percent.

The Council fixed the rates for over 1200 items under the Goods and Services tax, amid demand by some states to keep essential items under the lower tax category. The service now attracts 6 per cent tax.

Reacting to the announcements, industry said it may increase taxes for some stakeholders, but hoped to get benefits through the input credit system.

The 5% rate will be levied on transport services. "Companies may or may not structure their tariff as per provision of refund but customers will have to pay 18 per cent tax everytime bill is generated so consumers will be hit under the GST". The Council made a decision to keep 81% of a total of 1,211 items at the modal tax rate of 18% or below.