Talking Point: Healthcare, education to be out of GST

Besides making a strong case to the GST Council for not touching services that are out of tax net currently, the Centre will also pitch for keeping concessional rate for services like transport at the current level, Revenue Secretary Hasmukh Adhia said. The GST Council, headed by Union Finance Minister Arun Jaitley and comprising representatives of all states, is scheduled to meet in Srinagar on May 18-19 to decide on rates various good and services will be charged in the new indirect tax regime that is being targeted for rollout from July 1. 

Adhia said the endeavour would be to maintain the current tax incidence on a commodity or service at the same level in the new Goods and Services Tax (GST) regime. GST will subsume central levies like excise duty on manufactured products and service tax on rendering of services as well as state VAT on sale, to make for a national sales tax that will be levied at the time of consumption of a product or service. 

Adhia said the approach for the GST rollout would be to avoid any shock in the first year and any review for inclusion of a service or change in rate could be done in the second or third year of the implementation based on revenue realisation. “Our entire purpose will be that we don’t upset anything that is there now. We will try to do some smooth landing. So we will recommend to GST Council that whatever is the existing exemption list for service tax they should continue because we cannot do too many things at the same time,” he said. 

Currently, there are 17 items in negative list of services on which service tax is not levied. On top of that there are over 60 services, like religious pilgrimage, healthcare, education, skill development, journalistic activities which are exempt from service tax. Rajat Mohan, Director at tax consultant Nangia & Co, said: “GST is the biggest change that our country would see in last 50 years. I see that it was imperative that the government should continue exemptions on the current list of services which are tax neutral under the service tax regime.” “I am ecstatic that there would be no levy of GST on services rendered by Government, Reserve Bank of India, public conveniences, educational institution, services relating to agriculture, transmission or distribution of electricity, renting of residential dwelling for use as a residence, burial, healthcare, specified schemes of general insurance etc,” Mohan said. Mohan felt this might lead to cascading effect of taxes, but by maintaining the status quo Centre has ensured neither the consumer nor SMEs are not in a state of shock.