The government said on Tuesday that taxes on entertainment, Direct-To-Home (DTH) and cable services would come down in the new Goods and Services Tax (GST) as "entertainment tax" that is imposed by the states has been included in the GST regime.
On May 19, the GST Council - nodal agency for all GST related issues - headed by Finance Minister Arun Jaitley fixed tax rates for different goods under the five-tier tax regime in the range of 0-28 per cent.
A smartphone now attracts two per cent central excise duty, besides the value-added tax (VAT), which vary from state to state (five per cent to 15 per cent).
In the GST regime, the rate was pegged at 12 per cent. However, presently a total tax of more than 13.5% is levied on smart phones. Justifying the move, the finance ministry said that the entertainment tax rates on theatres/cinema halls is as high as 100% in some of the states.
However, assuming that GST does have the intended effect of increasing tax compliance, the tax burden would increase.
He added that in the number of discussions with the government, TAIPA had stated the impact of such non-inclusion and higher tax rates which will further impact the overall financial health of the telecommunication industry.
"If we include tax incidence on account of central sales tax (CST), octroi, entry tax, etc., the present total tax incidence would work out to more than 31 per cent". These services now attract entertainment tax levied by the states.
"Higher tax rate and non-availability to input tax credit defeats the whole objective of Prime Minister's vision of "One nation, One Market, One Law".
In services, software services, that is development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software will attract 198 PER cent GST while Electronic supply of software will attract a tax of 12 per cent.
Also, the government said, goods like "puja samagri", including havan samagri, will be under the "nil" tax category under GST, although the exact formulation is yet to be worked out.