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Service Tax up by 14% Mobile, Hotel to be costlier from June 1 – Finance Minister

Arun Jaitley Image Credits Livemint.com

Finance Minister Arun Jaitley in his Budget had proposed to raise service tax from 12.36 per cent (including education cess) to 14 per cent. The proposal takes effect from June 1, 2015

The union budget is on its way to get implemented from 1st June 2015 in which people will have to shell out some more monies from Monday 1st June 2015 for using mobile phones, eating out in restaurants and Traveling around as our finance minister Mr. Arun Jaitley has imposed 14 per cent service tax in his budget which has proposed to raise the service tax from 12.36 per cent to 14 per cent and this proposed tax structure will take effect from June 1.

The burden of raised costs of the essential commodities is already hampering the business and people with no raise in income and now this will be the additional burden to everyone. The tax is levied on all services, expect a small negative list. Some of the key services that will attract higher tax and hence become costlier are: railways, airlines, banking, insurance, advertising, architecture, construction, credit cards, event management and tour operators.

According the sources the mobile operators and credit card companies have already started sending the messages to the subscribers informing them about the proposed increase in service tax rates which will be levied on the next bills. According to railway ministry officials, fares for First Class and AC classes in passenger trains, besides freight charges, will go up by 0.5 per cent from June 1. “Currently, 3.7 per cent service tax is levied on train fares for AC Class, First Class and freight; this will be raised to 4.2 per cent from June that means the rise is only 0.5 per cent. The official informed that currently there is abatement of 70 per cent on passenger services.

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Jaitley had proposed to raise the service tax rate to 14 per cent to facilitate a smooth transition to the Goods and Services Tax (GST) regime, which the government wants to roll out from April 2016. Once implemented, GST will subsume service tax, excise and other local levies. “To facilitate a smooth transition to levy of tax on services by both the Centre and the States, it is proposed to increase the present rate of service tax plus education cesses from 12.36 per cent to a consolidated rate of 14 per cent,” Jaitley had said in Budget speech.

Education cess, which is levied on service tax, will be subsumed in the service tax rate with effect from June 1. Although the Budget also proposed a 2 per cent Swachh Bharat cess on selected services, the government is yet to come out with a notification in this regard. Once that comes into the force the total service tax on the selected services will be 16 per cent. Let’s hope that the government also provides the good infrastructure and proper facilities after collecting so much taxes instead of spending them on repeated elections and trips aboard.

Source: PTI

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