June 1st onwards, people will have to burn a bigger hole in their pockets when it comes to using mobiles, eating out and even travelling. Finance Minister Arun Jaitley had earlier proposed to raise the service tax from 12.36% to 14%. The proposal will take effect from today. The tax charges have been levied on all services apart from a small negative list.
The key services that will be most affected by the increase in service tax are – railways, airlines, banking, insurance, advertising, architecture, construction, credit cards, event management and tour operators. Most credit card and mobile operators have already sent out messages to their customers conveying the increase in service tax rate.
Railway ministry officials have also announced that fares for First Class and AC classes in passenger trains will increase by 0.5 per cent from today.
Mr Jaitley had earlier proposed to increase the service tax rate to 14 per cent to supervise a smooth transition to the Goods and Services Tax (GST) model, which the government wants to start from April 2016. Once started, 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,” Mr Jaitley had said in Budget speech.
