Service tax rates have seen an increase over the last two years. In 2015-16, service tax was increased from 12.36% to 14%. The Swachh Bharat cess of 0.5% also was hitched to it. This financial year, the Krishi Kalyan cess of 0.5% was imposed, taking the tax rate to 15%. Senior government officials confirm that the existing rate of 15%, which includes two cesses, could be raised by another 0.5% to 1%, as per Hindustan Times reports.
“The government might want to increase the service tax so that the shift to GST is not abrupt,” one of them said, referring to a proposed a Goods and Services Tax(GST) that has missed several deadlines for submission because of political conflict. Finance Minister Arun Jaitley has said he wants to produce it by July 1.
Just a week before the Union Budget 2017, it is expected that there could be a rise in service tax which indeed will make our day to day life a tad bit more expensive. Service tax is the charge we pay to the service providers which is later passed to the government. An increase in service tax in the February 1st budget will anticipate an increase in the cost of eating out, movies or flying. However, there are some services provided by the state on which this tax is not imposed.
A rise in service tax could give the government a window to offer cuts in personal income tax or spend more to revive personal consumption. It is to be noted that the personal consumption rate in India suffered a major blow after demonetisation. As per speculations, if the government change the rate of service tax, businesses will have to suffer as they will have to pay an additional cost just prior the time when GST is to be rolled out.
