The service sector in the country amounts to a considerable share in the GDP and its performance is critical. The service sector in the country is characterized by series of small establishments with low value additions that houses large numbers of unskilled persons. Though the GST’s contribution to the economy is significant, the service tax will amount to 2 percent from an enterprise. Some of the most important service sectors are banking, telecom, insurance, construction, business support and transportation.
The Government has come up with a four-tier GST rate structure for service providers such as 5 percent, 12 percent, 18 percent and 28 percent. However the bulk of services will be taxed at 18 percent. It is also said that the GST is more likely to increase the tax frequency for this sector.
Under GST, double taxation effect caused due to disputed goods and services in the current tax regime will be removed. Under the GST regime both supplies of goods and services will be treated equally with a unique rate of tax individually.
In terms of registration, the main challenge in the GST for service providers will be multiple registration. The service tax will be collected by the Center under a centralized registration format. However, States are unwilling to agree to centralized registration and thus the government is exploring a new arrangement for centralize compliance verification. This is an organised effort to persuade states through the GST council.
GST Impact On Service Providers
Currently service tax is applicable to 15 percent on services rendered which includes 0.5 percent for Swachh Bharath cess and 0.5 percent for Krishi Kalyan Cess. The GST will increase the rate of tax ranging between 18 percent to 28 percent which will result in expensive services and works. Whenever services attract lower than 15 percent service tax rates, the government will intervene to maintain its percentage.
Collection Of Service Tax from J&K
Under the GST regime, service tax will be extended and collected throughout the entire country including Jammu and Kashmir. The GST also allows the Central Government to collect service taxes on rendered services in the state of Jammu and Kashmir which will eventually increase the Government’s revenue.
Registering The Place Of Business
Under GST, centralized registration will not be available as the service provider needs to get registered under that particular State Government for registering his business office as well as from where he/she intends to provide services.
The GST Service tax law offers for a number of returns while the current service tax system provides two half-yearly returns in regards to the services rendered during that period.
The following number of GST service tax returns are:
- For Outward supplies of sale made by taxpayer except for Compounding taxpayer
- For Inward supplies received by a taxpayer except for Compounding taxpayer
- For Monthly return except for Compounding Taxpayer
- For Quarterly return for Compounding Taxpayer
- For Periodic return by Non-Resident Foreign Taxpayer
- For Return for Input Service Distributor (ISD)
- For Return for Tax Deducted at Source(TDS)
- For Annual Return
Multiple Rates For Multiple Services
Since the service sector of the country accounts to the country’s’ $2 trillion economy, there is a risk in slowing the sector’s growth. However, different economic classes have different tax values and cannot be taxed at the same rate. Under GST, healthcare and education services will be exempted, while services offered by five-star hotels will be taxed at 28 percent. Telecommunication and financial services will be taxed at a rate of 18 percent triggering a downfall.
According to the State Bank of India, some problems such as banks will need a minimum of six to eight weeks to ensure the working of some complex tasks including management of diverse back end processes, software training to link through the GST, employee training over new taxation system, and creation of a good management. There is no centralized registration for the Service sector while other jurisdictions under GST have centralized registrations.
How to avail GST?
With the advent of GST, we at LegalDesk.com are ready to enable applicants for GST with digital signature services, documentation services, agreements, affidavits, etc. to enable a smooth registration for GST. With everything at the click of a button away, you can register and get your GST Registration Certificate without having to leave your home or office.