The move will likely even out the overall price impact on consumers who now pay tax of 15 percent on all services, except for 17 categories on the ‘negative’ list that are exempted.
A two-tiered service tax structure will be taken up in the next meeting of the GST Council on May 18 in Srinagar.
The original plan was to have a single tax rate—18 percent—for services under GST. This would have made most services costlier under the new system, which is likely to be rolled out from July 1.
“Initially, it was under the impression that all services will fall under the 18 percent bracket. But now there is talk that they (GST Council) might put some services in the 12 percent bracket also,” a government official told Moneycontrol.
A bureaucrats’ panel (of states and the Centre) within the GST Council met on Wednesday and Thursday to work on the “classification” exercise–a comprehensive list specifying the tax rate that each good and service will attract, according to the slab structure.
The Council headed by Finance Minister Arun Jaitley had agreed on a four-slab structure — 5, 12, 18 and 28 percent — along with a cess on luxury and ‘sin’ goods such as tobacco.
“If we go by the logic, then all services should be under one bracket because then there will be no classification,” the official said.
However, there is a pressure that for some services, the rate should be 12 percent, especially for those services that would be regular for the common man, the official explained.
The fitment panel is expected to have a few more meetings before it puts its final recommendations up for discussion in the next GST Council’s two-day meeting starting May 18 in Srinagar.
Apart from finalising the rates for goods and services, the target right now is that all the states must pass the State GST (SGST) law by May 30, the official said.
States have already started passing the SGST laws, with Telangana being the first one to clear it.
“Come June 1, we want to ensure that 29-30 states have passed the SGST laws. Jammu and Kashmir might have a little bit of delay. By the first and second week of May, a good chunk of states should pass the law,” the official said.
Last week President Pranab Mukherjee gave his assent to the four GST-related legistations, after being passed by the Lok Sabha and Rajya Sabha.