Finance Minister Arun Jaitley may hike the service tax rate in the range of 16-18% from the current 15% of VAT in the upcoming Budget which is due on Wednesday as a precursor to the GST (Goods & Services Tax) rollout. Now this very move of hiking the service tax to at least 16-18% means flying to another country , eating out , the phone bills and many other expensive services will now become even more expensive!
This would be done in order to take the rates closer to the proposed tax slabs of the GST. The Goods and Services Tax which will subsume the Central and State levies like the excise duties , VAT and other service tax will be scheduled to rolled out from July 1 this year.
The tax slabs which has been decided for the GST are 5% , 12%, 18% and 28% and taking these service tax closer to one of the slabs is the most logical move in the budget as said by the tax experts.
The tax experts say that Finance Minister Arun Jaitley who had earlier hiked the Service Tax Rate by 0.5% to 15% may now raise the levy again by at least 1% point to 16% in the upcoming Union Budget on Wednesday that is 1st February 2017.
File Image: Finance Minister of India Arun Jaitley.
While some other tax experts feel that there could be a different service tax rates with a lower 12% for some basic services and the highest 18% for the remaining ones.
And this means , till the month of April – June the government will gain enough revenue to meet the expenses for the various schemes and programs and also could contain the impact caused by demonetisation.
And also a service tax rate closer to the GST rate will help the consumers avoid a price shock when they will learn about the new national sales tax.
This will be the 3rd time when Arun Jaitley will raise the Service Tax Rate , it was 1st hiked on June 1 , 2015 from 12,36% to 14% and a 0.5% Swachh Bharat Cess was also levied on all the services hence taking the total tax rate to 14.5 from November 15, 2015.
And during the last budget Arun Jaitley also imposed a Krishi Kalyan Cess at teh rate of 0.5% on all the taxable services to take the levy up to 15%.