Come June 1, consumers will have to shell out more for eating out, using credit and debit cards, cabs and mobile phones. The finance ministry on Tuesday notified the increased service tax rate of 14 per cent effective from the next month.However, the Swachchha Bharat Cess is yet to be notified. The government had put an enabling provision in the Service Tax Act to empower the Centre to impose this cess on all or certain taxable services at a rate of 2 per cent. The proceeds from this will be used for Swachh Bharat initiatives.
With the notification, several services including cable and DTH services, beauty parlour charges, courier service, laundry services, ordering stock broking, asset management and insurance will become expensive. In Budget 2015-16, the government had hiked the service tax to 14 per cent from the current 12.36 per cent. “To facilitate a smooth transition to levy of tax on services by both the Centre and the states, the service tax rate is being increased from 12 per cent plus education cesses to 14 per cent.
The education cess and secondary and higher education cess shall be subsumed in the new service tax rate,” finance minister Arun Jaitley had said. However, there are no changes in the abatement rules.
The change in tax rate was done as a step towards GST though a deviation from the recommendation of the 13th finance commission. However, the hike will not impact packaged fruits and vegetables as pre-cooling, ripening, retail packing and labelling of these items was exempted from the service tax in the Budget.
In the Budget negative list was pruned to include services provided by way of access to amusement facility, admission to entertainment events like concerts and pageants if the amount charged for admission is more than Rs 500, admission to circus, dance etc, service by way of carrying out any processes as job work for production or manufacture of alcoholic liquor among others to be chargeable for service tax.