GST is a tax that is levied on almost all goods and services. The taxation works on the recommendation of the GST council.
The service sector is one of the strongest sectors in India and the GST charged on the services is a 4-tier structure i.e.- 5%, 12%, 18%, and 28%.
In this article, we will discuss in detail GST On Services: How to Calculate, Income Tax Credit on Services, Type of Business in Services, etc.
GST rates on services
The following are the GST Rates applicable on services of various kinds-
5% GST Rate
- Transportation of goods, and passengers using Indian Railways
- Goods transported in a vessel from outside India
- Renting a motor cab without fuel cost
- Transport services in AC contract/stage or radio taxi
- Transport by air
- Tour operator services
- Leasing of aircrafts
- Working for the printing of newspapers
12% GST Rate
- Rail transportation of goods in containers from a third party other than Indian Railways
- Air travel excluding economy
- Food /drinks at restaurants without AC/heating or liquor license
- Renting of accommodation for more than Rs.1000 and less than Rs.2500 per day
- Chit fund services by foremen
- Tour operator services
- Leasing of aircrafts
- Construction of building for sale
- Intellectual Property rights temporarily
18% GST Rate
- Food/drinks at restaurants with a liquor license
- Food /drinks at restaurants with AC/heating
- Outdoor catering
- Renting accommodation for more than Rs.2500 but less than Rs.5000 per day
- Supply of food, shamiyana, and party arrangement
- Circus, Indian classical, folk, theatre, drama
- Supply of works contract
- Movie Tickets over Rs. 100
- Hotel accommodation for transaction value per unit per day being with Rs 2,500-7,500 tariff
28% GST Rate
- Entertainment events-amusement facilities, water parks, films, theme parks, joy rides, merry-go-round, race course, go-carting, casinos, ballet, sporting events like IPL
- Race club services
- Gambling
- Food/drinks at AC 5-star hotels
- Accommodation in 5-star hotels or above
- Hotel accommodation for transaction value per unit per day is Rs. 7501 or more
GST on Service Imports
The services which are imported from outside of India are treated as interstate supply hence, attracting IGST. Section 7(1)(b) of the Central Goods and Services Tax Act, 2017 mentions that any service imported from outside of the geographical boundaries of India with consideration will be treated as a supply regales of whether it is being used for business purposes or not.
If the service is imported without consideration, then the supply will not be considered as supply but, there are no clear mechanisms to determine which services will be counted for consideration.
GST on Service Exports
An export under the GST regime will have no GST involved, meaning, all the export are GST-free. It has been done to promote exports.
GST Credits for Service Providers
GST is known for the input tax credit it offers, you can claim GST on the services provided to your business. As a service business, you can also claim ITC on the goods and services you use in your business. You’ll have to keep the invoices and bill which you’ll get for purchasing the service.
