There may be yet another tweaking in the structure of the goods and services tax that is proposed to be rolled out in little less than six months. The Centre is looking at the option of having dual tax rates on services as well. The rationale is the same as that for levying tax at multiples rates on goods — social responsibility. “It may not be acceptable for people to pay service tax on essential services like medical auxiliary services at the same rate as that for services provided by say, advertising agencies and beauty parlours,” a senior government official said.

The move would be significantly different from the current blueprint for GST that envisages multiple tax rates for goods and a single tax rate for services.

The idea of a dual service tax rate becoming a reality means a shift from the current indirect tax regime, where services are taxed by the Centre at a single rate of 10 per cent.

Interestingly, while the empowered committee of state finance ministers has been vocal about the need for multiple tax rates on goods to ensure equitable taxation, it has been silent on any such plan for the services sector.

“The empowered committee has so far neither discussed nor advocated dual rates for service tax. But the finance ministry feels that it is its duty to forward the proposal to states which do not have any experience in taxing services. A final decision will, however, rest with the states,” the official explained.

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