Two tax slabs for services likely; Council is examining proposal

According to recent reports, the Goods and Services Tax (GST) Council is examining a proposal to introduce two tax slabs for services under the GST regime. The proposal aims to simplify the tax structure for services and ease GST compliance for small and medium businesses. Currently, services are taxed under a single slab of 18% under GST.

What is the proposal?

The proposal suggests the introduction of two tax slabs of 12% and 18% for services, based on the nature of services offered. Services that are essential or basic in nature, like healthcare, education, and public transportation, could be taxed at 12%, while other services could be taxed at 18%. The proposal aims to provide relief to businesses that offer essential services and reduce the burden of GST compliance on them.

How will it impact businesses?

The proposed tax structure for services is expected to benefit small and medium businesses, especially those in the service sector. The introduction of two tax slabs will simplify the tax structure and reduce compliance costs, making it easier for businesses to file GST returns. With the proposed tax structure, businesses offering essential services will have a lower tax burden, which will help them to offer their services at a lower cost.

What are the challenges?

The proposal to introduce two tax slabs for services could face some challenges. The GST Council will have to define the services that fall under the 12% and 18% tax slabs, which could be a challenging task. Moreover, there could be concerns over the classification of services, as some services may be difficult to categorize as essential or non-essential. Additionally, there could be concerns over the revenue implications of the proposed tax structure for services.

Conclusion

The proposal to introduce two tax slabs for services under the GST regime could be a significant step towards simplifying the tax structure and easing GST compliance for businesses. The proposed tax structure is expected to benefit small and medium businesses, especially those offering essential services. However, the implementation of the proposed tax structure will depend on the outcome of the GST Council's examination of the proposal.