Dining out in restaurants, buying new properties and insurance, mobile phone calls may be pricier if the service tax rate is hiked up in his third budget due on 29th February by Mr.Arun Jaitley, the Fiannce Minister. Service tax is chargeable on most all kinds of services barring very few in the negative list.
The hum about the service tax hike has caught stronger winds considering the transition to the Goods and Service Tax (GST). Mihir Vora, Director and chief investment officer of Max Life Insurance expressed his view to NDTV Proift that the government might decide to take up the service tax rate to 16 percent as it was closer to the revenue neutral rate of 18 percent in the propped GST,
Ashish Kumar of Elara Capital opined that the government could bring a central GST or simply raise the service tax rates on a suo moto basis to carry it closer to the average rate of 17-18 percent proposed by the Subramanian Committee. The committee advocated a revenue neutral rate of 15-15.5 percent, which would involve a standard rate on goods and services of 16.9-18.9 percent under various situations. Mr. Kumar further added that in both cases, a raise in the service tax by 200 basis points as minimum looked forthcoming.
Last year, the raise in the service tax rate was from 12.36 percent (including education cess) to 14 percent, which was further reinforced with a hike of another 0.5 percent for “Swatch Bharat”. At present, the service tax rate is 14.5 percent.
Various services fall under the gambit of service tax like advertising, air travel, and service by architects, some constructions, credit cards and event management. Hike in service tax will also be negative for the telecom and service industries including hotels and real estate business.