The implementation of the goods and services tax led to the simplification of the indirect tax structure of the country. A common misconception related to this tax is that most of the taxes subsumed by the new levy have completely stopped to exist. The new law which forced companies to hire GST consulting services for understanding new compliance requirements has replaced old taxes in the supply of many products and services. These levies though are still being charged in transactions involving a few items or services not covered under GST. in this article, a list of such services which do not come under the purview of the new law is being presented. Let’s take a look at it.
1. Sale Of Petroleum Products
A major category which has not been kept under the new levy is petroleum products. All items under this grouping, such as crude oil and motor spirits along with Aviation Turbine Fuel (ATF) and High-Speed Diesel (HSD) are not taxed under the new regime. States are charging the VAT and/ or sales tax on transactions involving the sale of such products according to their tax slabs. The Central Excise Act is still applicable on these products allowing the Union government to earn revenue from their sale. Petro-goods are an important input material for businesses but their non-inclusion in the new tax regime robs enterprises of the chance of claiming input tax credits on the levies paid for procuring these items. The main reason due to which the supply of fuel oils has not been kept under GST is that it constitutes a large part the revenue earned by the states and the Union governments. However, it is expected that in the future these items will be brought into the scope of the new tax.
2. Services Rendered By An Employee To His/Her Employer
Some activities have been classified under the new law as being neither goods nor services meaning that GST will not be applicable to their supply. One such activity is the service rendered by a staff member to an employer as a part of his/ her employment. The supply of these services will not attract any GST. Employees will need to pay income tax on the salary earned by them according to the tax slab specified for a financial year. This means that only direct tax like the tax deducted at source (TDS) will be charged on the salary earned by an employee.
3. Sale Of Alcoholic Beverages For Human Consumption
Another one of the major services not covered under GST is the sale of alcoholic beverages for human consumption. Sales tax and excise duty are being charged by many states on the sale of alcohol. Some states also levy the Value Added Tax (VAT) on such transactions. Alcohol is another product which helps governments generate high revenue. In some states, the state excise duty levied on the sale on such beverages contributes almost a quarter of the total tax revenue generated. The state governments are reluctant to lose such a productive medium for revenue generation due to which these items have not been made a part of the new tax regime.
4. Duties Performed By Public Representatives
The duties performed by public representatives or any person holding a post under the provisions of the Constitution have been exempted from GST. The services rendered by Members of Parliament, State Legislative Assemblies/ Councils, Panchayats, municipalities and other local bodies as part of their jobs will not attract the new tax. The services provided by the chairperson, director, member of a body created by the government or a local body and who is not an employee of the same are also out of the purview of the new tax.
5. Transmission Or Distribution Of Electricity
Electricity has been kept out of the new tax regime for now. The transmission or distribution of electricity by an agency does not attract GST. All taxes which were applicable on electric supply in the pre-GST era are still being levied on such transactions. Electric power is an essential input product for most manufacturing activities. Keeping it out of the ambit of the new law takes away the opportunity for businesses to claim input tax credits on the levies paid for buying power.
6. Funeral Services For Any Religion
The GST council decided that the funeral services for all religions will not be charged under the new law. GST consultants in India say that services provided for the funeral, burial, crematorium or mortuary including transportation of the deceased, do not attract the new tax. The service provided by a local authority in the form of issuing the death certificate is also excluded from the GST regime.
7. Court Or Tribunal Services
The new tax is not levied on the services provided by a court of law or a specified appellate tribunal. The services rendered by the District Courts, High Courts and the Supreme Court of India do not fall under the new tax regime. However, transactions involving a legal practitioner or an agency providing legal services to businesses with a turnover of more than Rs 20 lakhs will be taxed according to the Reverse Charge Mechanism. This means that the liability of paying the levy rests on the recipient of the service rather than the provider.
The primary objective of implementing the new law in the country was to unify the taxes and remove the confusion surrounding the indirect tax structure of the country. The exemption of many of the items from the new tax like funeral services is a good decision but some services not covered under GST like the supply of petroleum products are not beneficial to the end user. Bringing them under the ambit of the law will help people save money on using such items.