Brace yourself: GST is coming and many services will burn a big hole in your pocket

It’s going to be too expensive to be served in India, thanks to the Goods and Services Tax (GST) which will become a reality on 1 July. This is because the new tax regime is going to increase the tax incidence on many services.

Representational image. Reuters

From telecom to banking, most of the services will get costly once the tax regime kicks in. Your monthly telephone bill will increase, as the gains from input tax credit will not be that significant. At present, telecom consumers are charged 15 percent in form of tax plus cess over their phone bills. From 1 July, it will rise to 18 percent.

According to ToI, mobile operators like Bharti Airtel, Vodafone, Idea Cellular and Reliance Jio pushed for lowering of GST rates to 5 percent at par with essential services, but the government decided to persist with 18 percent rate.

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“We are disappointed that there has been no change in the GST rate for telecom, which is an essential service. It will increase the cost to consumers,” COAI director-general Rajan S Mathews had told PTI last week. Earlier this month, GST Council had lowered tax rates on 66 of the 133 items demanded by various sections of the industry. Telecom wasn’t one of them.

If making calls will become expensive, so will insurance. The tax burden will push the premium paid by consumers. In fact, pure term insurance plans will be hit the most as the tax rises from 15 percent to 18 percent. Ironically, it’s the best kind of insurance policy from a financial product point of view. In a nation where a major chunk of population is under insured, a move like this will surely impact buying decision.

If you plan to go out for a meal, be ready to shell out more money as well. The tax rate for air-conditioned restaurants, including restaurants in five-star hotels, has been set at 18 percent.

Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having room tariff Rs 1,000 and above but less than Rs 2,500 per room per day has been set at 12 percent.

Further, renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes where room tariff is Rs 2,500 and above but less than Rs 5,000 per room per day, the GST rate has been fixed at 18 percent.

In the case of accommodation in hotels including 5 star and above rated hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, where room rent is Rs 5,000and above per night per room, the rate stands at 28 percent.

"This isn’t a move which hotelier have welcomed, The Hotel and Restaurant Association of Western India President Dilip Datwani recently told PTI.

“While neighbouring countries pay 5-12 percent GST or equivalent tax, hotels in India would be levying up to 28 percent GST. This may not augur well with foreign inbound tourists who are lured with significant deals and sops by our neighbours," Datwani said.

In short, brace yourself for 1 July, as GST is coming.

Schedule of GST Rates for Services by Firstpost on Scribd

With inputs from PTI