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Service tax hiked to 14%: Know how it will burn your pocket!

Already struggling to cope with rising inflation, the common man will now have to make their pockets adjustable to the revised service tax structure. With effect from today, service tax charges have been increased from
India TV Business Desk June 01, 2015 18:05 IST
India TV Business Desk

Already struggling to cope with rising inflation, the common man will now have to make their pockets adjustable to the revised service tax structure. With effect from today, service tax charges have been increased from 12.36 per cent to 14 per cent.

As proposed by Union Finance Minister Arun Jaitley, the increase in service tax will be applicable on all services except 16.  

"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," Finance Mnister Jaitley had said in Budget speech.

Earlier, the service tax charged was 12% plus 0.36% education cess, amounting to 12.36% whereas from now onwards,  14% service tax (inclusive of education cess) will be extracted from the common man's pocket.

Let's try to understand how it's going to affect the budget of a common man:

1. Traveling in AC Coach

From toady onwards, travel in AC and first class will get costlier.  The service tax in AC will scale up from 3.7% to 4.2% with a difference of 0.5 per cent. To be more precise, AC ticket of Rs 1000 will now get costlier by Rs 5.

 

2. Travel by Air

Domestic travel by flight will now be increased by Rs 10 per on thousand rupees whereas International flight will get costlier by Rs 20 per thousand rupees.

 

3. Telephone Bills

Talking to your loved ones is also going to cost more. Previously, the mobile/ landline bill was Rs 1,124 if you talked for Rs 1000 rupees but now you will have to pay Rs. 1, 1140 for the same.

 

4. Life Insurance

Life Insurance premium will experience a surge of 0.5 percent. On new insurance, the service tax tariff is revised from 3% to 3.5 % whereas from second year one will have to pay 1.75 % service tax, a 0.25% increase in the previous tariff of 1.5 per cent.

 

5. Eating in Restaurants

Service tax applicable on eating out in restaurant/hotels is revised from 4.944 % to 5.6 %.

Earlier, you had to pay a bill of Rs 1049 for eating food worth Rs 1,000. According to new rates, you will now have to pay a bill of Rs 1056 for the same.

 

6. Buying Property

While buying properties of worth less than one crore rupees, you will have to pay the service tax of 3.5 percent or 12.36 percent of 25% of the base price.  If the property is worth more than one crore, the service tax payable is 4.2 per cent or 14 per cent of 30% of the base price.

The current hike in Service Tax is expected to raise the government's revenues by 24.76% to 2.09 lakh crore in 2015-16 compared to Rs 1.68 lakh crore earned in last fiscal year.

With government planning to add 2% tax for Swachch Bharat Mission in the Union Budget, the service tax might see an upward movement in the coming days. However, the proposal is not yet implemented in the existing tax regime.