GST Council recommends changes in services GST

A meeting of the GST Council chaired by finance minister Arun Jaitley on Thursday recommended several relief measures regarding GST rates on goods and services covering many sectors and commodities. The Council has also recommended issuance of certain clarifications on issues relating to GST rates and taxability of certain goods and services.

The Council at its 25th meeting recommended certain changes relating to GST rates on certain services. Accordingly, it has been decided to make the following exemptions in GST on the following services;

  • Viability Gap Funding (VGF) - for another 3 years from the date of commencement of RCS airport from the present period of one year;
  • Supply of services by way of providing information under RTI Act, 2005;
  • Legal services provided to government, local authority, governmental authority and government entity;

It has also been decided to reduce GST rate on construction of metro and monorail projects (construction, erection, commissioning or installation of original works) from 18 per cent  to 12 per cent.

GST will be levied on small housekeeping service providers, notified under section 9 (5) of GST Act, who provide housekeeping service through ECO, at 5 per cent without ITC.

GST rate on tailoring service will be reduced from 18 per cent to 5 per cent.

GST rate on services by way of admission to theme parks, water parks, joy rides, merry-go-rounds, go-carting and ballet to be reduced from 28 per cent to 18 per cent.

Besides, the Council decided to grant following GST exemptions:

  • Service by way of  transportation of goods from India to a place outside India by air;
  • Service by way of transportation of goods from India to a place outside India by sea and provide that value of such service may be excluded from the value of exempted services for the purpose of reversal of ITC.

These exemptions may be granted with a sunset clause up to 30 September 2018.

It has been decided to exempt services provided by the Naval Insurance Group Fund by way of Life Insurance to personnel of Coast Guard under the Group Insurance Scheme of the central government retrospectively from 1 July 2017.

It has also been decided to exempt IGST payable under section 5(1) of the IGST Act, 2017 on supply of services covered by item 5(c) of Schedule II of the CGST Act, 2017 to the extent of  aggregate of the duties and taxes leviable under section 3(7) of the Customs Tariff Act, 1975 read with sections 5 & 7 of IGST Act, 2017 on part of consideration declared under section 14(1) of the Customs Act, 1962 towards royalty and licence fee includible in transaction value as specified under Rule 10 (c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.

Also, ITC of input services in the same line of business will be allowed at the GST rate of 5 per cent in case of tour operator service.

GST rate will be reduced from 18 per cent to 12 per cent) on the Works Contract Services (WCS) provided by sub-contractor to the main contractor providing WCS to central government, state government, union territory, a local authority, a governmental authority or a government entity, which attract GST of 12 per cent. Likewise, WCS attracting 5 per cent GST, their sub-contractor would also be liable at 5 per cent.

The exemption limit against individual contribution of members in respect of services provided by Resident Welfare Association (unincorporated or non-profit entity) has been raised from Rs5,000 to Rs7,500 per month.

GST rate on transportation of petroleum crude and petroleum products (MS, HSD, ATF) will be reduced from 18 per cent to 5 per cent without ITC and 12 per cent with ITC.

Dollar denominated services provided by financial intermediaries located in IFSC SEZ, which have been deemed to be outside India under the various regulations by RBI, IRDAI, SEBI or any financial regulatory authority, to a person outside India will be exempt from GST.

Besides the services by government or local authority to governmental authority or government entity, by way of lease of land, and supply of land or undivided share of land by way of lease or sub lease where such supply is a part of  specified composite supply of construction of flats etc will be exempt from GST.

Suitable amendment will be carried out in the provision relating to valuation of construction service involving transfer of land or undivided share of land, so as to ensure that buyers pay the same effective rate of GST on property built on leasehold and freehold land.

The Council also decided to amend entry 3 of notification No 12/2017-CT(R) so as to exempt pure services provided to government entity and also to expand the pure services exemption so as to include composite supply involving predominantly supply of services, ie, up to 25 per cent of supply of goods.

GST on job work services rate for manufacture of leather goods and footwear will be reduced to 5 per cent.

Services relating to admission to, or conduct of examination provided to all educational institutions, as defined in the notification will be exempt.

Services by educational institution by way of conduct of entrance examination against consideration in the form of entrance fee will be exempt from GST.

The limit for exemption of services of life insurance business provided under life micro insurance product approved by IRDAI up to maximum amount of cover of Rs50,000 to be enhanced to Rs2 lakh.

(It is expected that the premium amount charged from the government/insured in respect of future insurance services is reduced.)

It has been decided to extend the threshold limit for exemption for all theatrical performances like music, dance, drama, orchestra, folk or classical arts and all other such activities in any Indian language in theatre GST from Rs250 to Rs500 per person and to also extend the threshold exemption to services by way of admission to a planetarium.

GST on common effluent treatment plants services for treatment of effluents will be reduced from 18 per cent to 12 per cent.

Fumigation service provided to a warehouse of agricultural produce will also be exempt from GST.

GST in respect of mining or exploration services of petroleum crude and natural gas and for drilling services in respect of the said goods will be reduced to 12 per cent.

Subscription of online educational journals/periodicals by educational institutions that provide degree recognised by any law will be exempt from GST.

Service provided by way of renting of transport vehicles provided to a person providing services of transportation of students, faculty and staff to an educational institution providing education up to higher secondary or equivalent will also be exempt from GST.

The concessional rate of GST will be extended to houses constructed/ acquired under the Credit Linked Subsidy Scheme for Economically Weaker Section (EWS) / Lower Income Group (LIG) / Middle Income Group-1 (MlG-1) / Middle Income Group-2 (MlG-2) under the Housing for All (Urban) Mission/Pradhan MantriAwasYojana (Urban) and low-cost houses up to a carpet area of 60 square metres per house in a housing project which has been given infrastructure status, as proposed by ministry of housing and urban affairs.

Time charter services will be taxed at GST rate of 5 per cent, that is at the same rate as applicable to voyage charter or bare boat charter, with the same conditions.

Concessional GST of 12 per cent will be levied on the services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of building used for providing (for instance, centralized cooking or distributing) mid-day meal scheme by an entity registered under section 12AA of IT Act.

Services provided by and to Fédération Internationale de Football Association (FIFA) and its subsidiaries directly or indirectly related to any of the events under FIFA U-20 World Cup in case the said event is hosted by India will be exempt from GST.

The government's share of profit petroleum will be exempt from GST and that petroleum will not be taxable per se.

The Council also decided to rationalise certain exemption entries.

Accordingly, CGST rules on value of exempt supply under sub-section (2) of section 17, shall not include the value of deposits, loans or advances on which interest or discount is earned (This will not apply to a banking company and a financial institution including a non-banking financial company engaged in providing services by way of extending deposits, loans or advances).

The GSY Council also decided to defer the liability to pay GST in case of TDR against consideration in the form of construction service and on construction service against consideration in the form of TDR to the time when the possession or right in the property is transferred to the land owner by entering into a conveyance deed or similar instrument (eg allotment letter). No deferment in point of taxation in respect of cash component.

Renting of immovable property by government or local authority to a registered person under reverse charge will be taxed while renting of immovable property by government or local authority to un-registered person shall continue under forward charge

The definition of insurance agent in the reverse charge notification will have the same meaning as assigned to it in clause (10) of section 2 of the Insurance Act, 1938, so that corporate agents get excluded from reverse charge.

A provision has been inserted in GST Rules under section 15 of GST Act that the value of lottery shall be 100/112 or 100/128 of the price of lottery ticket notified in the Gazette (the same is currently notified in the rate notification).

The GST rate schedule for goods will be 28 per cent and this will have actionable claim on betting and gambling, including horse racing.

It has been decided to insert in GST rules under section 15 of GST Act,- ''Notwithstanding anything contained in this chapter, value of supply of Betting & Gambling shall be 100 % of the face value of the bet or the amount paid into the totalizator.''

The Council has also clarified the following;

  • The exemption of Rs1,000 per day or equivalent (declared tariff) is available in respect of accommodation service in hostels;
  • The fee paid by litigants in the Consumer Disputes Commissions and any penalty imposed by these commissions, will not attract GST;
  • Elephant/ camel joy rides are not classified as transportation services and attract GST at 18 per cent with threshold exemption to small services providers;
  • Leasing or rental service, with or without operator, of goods, will attract same GST as supply of like goods involving transfer of title in the said goods. Therefore, the GST rate for the rental services of self-propelled access equipment (Boom. Scissors/Telehandlers) is 28 per cent.

It has also been clarified that:

  • Services provided by senior doctors/consultants/technicians hired by the hospitals, whether employees or not, are healthcare services are exempt from GST.
  • The entire amount charged by hospitals from patients, including the retention money and the fee/payments made to the doctors etc, is towards the healthcare services provided by the hospitals to the patients and is exempt.
  • Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors is taxable.

Also, services by way of admission to entertainment events or access to amusement facilities including casinos, race-course; ancillary services provided by casinos and race-course in relation to such admission; services given by race-course by way of totalisator (if given through some other person or charged separately as fees for using totalisator for purpose of betting are taxable at 28 per cent.

Services given by race-course by way of license to bookmaker which is not a service by way of betting and gambling, is taxable at 18 per cent.

Notifications giving effect to these recommendations of the Council will be issued on 25 January 2018.