Starting Monday morning, one will have to pay more for eating out, travelling in trains and in air, mobile service and other tertiary services. The proposed increase in Service tax has become effective starting today, the 1st June.
The BJP-led NDA government had proposed the raise of Service tax from 12.6% to 14% in this year’s financial budget. After the passage of the budget bill early last month, Service tax was slated to be increased from 1st June.
In his budget speech, the Union Finance Minister Arun Jaitley had defended the increase “to facilitate a smooth transition to the Goods and Services Tax (GST)”.
“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 cess from 12.36 per cent to a consolidated rate of 14 per cent,” Union Finance Minister had told the house in his Budget speech.
Notably, the government wants to roll out GST from April 2016. Also, the education cess, which is levied on service tax, will be subsumed in the service tax rate staring Monday.
With the hike in Service tax, several key services are set to increase. Among the important ones to be hiked will be service fees in banks, insurance, advertising, architecture, construction and even charges on the credit cards transaction. Regarding the travel, passengers travelling the First and AC classes will be paying more with tickets prices going up by 0.5% per berth. The commercial transportation too will be expensive as the Freight charges will go up by 0.5 %.
“Currently, 3.7 per cent service tax is levied on train fares for AC Class, First Class and freight. This will go up to 4.2 per cent from the June, which means the rise is only 0.5 per cent,” the railway officials told the press.
However, some opposition parties have criticised NDA government, accusing them of “burdening the common man” with this hike in Service tax. They claim this hike is certain to have a cascading effect on other goods.