What are the GST Rates for Services?

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Published Date:  30-11-2023   Author:   shradha-kabr
what are the gst rates for services

An essential component of financial literacy is comprehending the intricacies of Goods and Services Tax (GST) rates for services. Various services fall under different tax categories under the consumption-based Goods and Services Tax (GST). The GST rates affect service providers and consumers, ranging from professional and consulting services to entertainment and healthcare.  

Comprehending the subtleties of these rates is crucial for companies to compute their tax obligations precisely and for individuals to make knowledgeable financial choices. Maintaining a current understanding of the relevant rates as the GST system changes guarantees adherence to tax laws and supports the smooth operation of the overall economy.

GST Rates for Different Services

The GST council in India imposes tax slab rates for GST. They have the same structure for goods and services under GST – a 4-tier tax plan. Different services have different GST rates applicable to this law, varying between 5%, 12%, 18%, and 28%. Many industries and sectors come under the GST rate for services. However, two sectors – education and healthcare services are exempted from the GST service tax.

Service-Wise GST Rate Classifications

Through the table below, let’s look at which services fall under which tax slab:

Tab Slab Services
Tier I – 5%
  • Railways – transportation of passengers and goods
  • Goods transported from outside India in a vessel
  • Renting a cab without paying for fuel cost
  • Using transport services in the AC stage/contract or taxi
  • Air transport
  • Tour operator services
  • Aircraft leasing
  • Working for newspaper printing
Tier II – 12%
  • Goods transported through rail services from a third party and not Indian railways
  • Air travel, apart from the economy
  • Drinks and food at a restaurant without heating, AC, or liquor license
  • Renting a place between INR 1000 and 2500 per day
  • Chit fund by foreman
  • Services by tour operator
  • Aircraft leasing
  • Building construction for sale purposes
  • Temporary rights on intellectual property
Tier III – 18%
  • Food and drink at a liquor-licensed restaurant
  • Food and beverages at an AC and heating restaurant
  • Outdoor catering
  • Renting a place between INR 2500 and 5000 per day
  • Provision of food, shamiana, and planning of parties
  • Indian classical, circus, theater, folk, and drama
  • Works contract supply
  • Movie tickets above INR 100
  • Hotel accommodations with a daily transaction value of between INR 2500 and 7500
Tier IV – 28%
  • Competitions, amusement parks, water parks, movies, theme parks, joy rides, merry-go-rounds, racetracks, go-karting, casinos, ballet, and athletic competitions such as the Indian Premier League
  • Race club services
  • Gambling
  • Food and drink at a 5-star restaurant
  • Hotel accommodations with a daily transaction value of at least Rs. 7501 per unit

Understanding Taxation Rates on Services

Like products are classified under the HSN codes to help people understand the GST rates applicable to them, services are also organized similarly. The government uses SAC or services accounting code for services, which the Service Tax Department of India develops.      

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Each service applicable for taxes will have a 5%, 12%, 18%, or 28% rate applied. However, if the service is not exempt and no GST rate is provided, a default rate of 18% will apply to those services.

Categorizes of GST Rates for Services

The GST council levies the GST rates for services and decides on the slabs. The GST council also has to review these rates regularly and periodically. The GST rates are developed based on the needs and luxuries. The services that are necessities will have either no or low service rates, and amenities will have higher tax slabs.

In India, the GST rates for services are 5%, 12%, 18% and 28%. The GST council adds or deletes the services in each category after a proper review and consideration. Over the years, several changes have happened in the included services with tax slabs. The recent revision occurred after a meeting in 2020, which saw changes in the GST rate for certain services.

Service Sectors and Corresponding GST Rates

Let’s look at the GST rates sector-wise below. However, one sector can have different service GST rates depending on whether it is a necessity or a luxury service provided by that sector.

5% GST Rates
Transportation Lease
Advertisement Tour and Travel
Printing Textile
Jewelry
12% GST Rates
Hospitality Transportation
Chit Fund Construction
18% GST Rates
Hospitality Entertainment
Work Contracts Movies
28% GST Rates
Hospitality Entertainment
Race Clubs Gambling

Service Taxation Rate Structure

A crucial component of the fiscal landscape, the service taxation rate structure specifies the charges imposed on different services. This structure in India has significantly changed due to the Goods and Services Tax (GST) replacing the Service Tax. Under the Goods and Services Tax (GST), services are categorized into slabs, each with a different tax rate (e.g., 5%, 12%, 18%, and 28%). 

This broad spectrum includes professional advice, entertainment, and transportation services. The complex rate structure for service taxes reflects the government’s efforts to standardize and expedite the applicability of taxes to a broad range of services. In the ever-changing world of service taxation, it becomes critical for both enterprises and consumers to understand these subtleties to ensure appropriate compliance and financial planning.

Conclusion

Knowing the GST rates for services is essential for navigating the complex tax landscape for consumers and businesses. The government’s attempt to develop a flexible framework corresponding to different service categories is reflected in the varied rate structure, ranging from 5% to 28%.  

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Businesses must keep up with these rates to correctly estimate their tax obligations, make wise financial decisions, and guarantee compliance with changing tax laws. Keeping up with GST rates helps create a more efficient and transparent tax environment, which promotes economic growth and stability as the services industry develops.

FAQs

  • How much is the GST on restaurant and hotel services?

The provision of restaurant services at locations other than hotels or premises where the room tariff is more than INR 7,500 is subject to a 5 percent tax. At the same time, the provision of restaurant services at hotels where the room tariff is more than INR 7,500 per day is subject to an 18 percent tax.

  • Is there any limit to professional services GST?

The annual revenue threshold for GST registration for enterprises in most states is INR 20 lakhs for services.

  • Who pays service tax GST?

Generally, GST must be paid by the provider of the products or services. Under the reverse charge method, the recipient may be liable in certain situations, such as imports and other declared supplies.

  • How many GST rates are there for services?

There are 5 GST service tax slabs for services. These are Nil, 5%, 12%, 18%, and 28%.

  • How is the GST for professional services calculated?

The Taxable amount multiplied by the GST rate yields the GST. The amounts of CGST and SGST, if they are to be applied, are each half of the overall GST sum.

  • What is the GST rate for professional and legal services?

Legal and professional services have an 18% GST service rate. These can be legal and accounting services, legal advisory and representation services concerning criminal law, etc.

  • For service providers making less than 20 lakhs, is GST required?

A person is not required to register under the GST system if his total revenue for the fiscal year is less than INR 20 lakhs. The supplier is legally required to register and begin paying taxes as soon as his turnover reaches twenty lakhs.

  • Is it a mandate to pay GST on services?

If a service provider’s total revenue surpasses INR 10 lakh (for particular category states) or INR 20 lakh (for normal category states), they must register.

  • Can people claim GST for services?

If the services are later utilized for business and not for personal use, claims for this type of input tax credit may be made. The buyer must hold the tax invoice, debit note, or other document showing payment for the purchase.

  • Which services charge an 18% GST rate?

Services such as outdoor catering, food and drink at a liquor-licensed restaurant, movie tickets above INR 100, hotel accommodations with a daily transaction value of between INR 2500 and 7500, etc., have a GST rate of 18%.

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Shradha Kabr

Shradha Kabra is an experienced finance writer based in India with 15 years of experience simplifying complex financial topics for readers. Her articles on taxation, Indian stock markets, and other national finance issues are well-researched and presented in an easy-to-understand style. Shradha holds a Double Master's degree and aims to make financial literacy accessible to all through her writing.

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