Service tax hiked from 12.36% to 14%

Service tax rate has been hiked from 12.4% to 14% effective from today(June 1). Finance Minister Arun Jaitley in his Budget had proposed to raise service tax from 12.36 per cent (including education cess) to 14 per cent. The tax is levied on all services, expect a small negative list. Some of the key services that will attract higher tax and hence become costlier are: railways, airlines, banking, insurance, advertising, architecture, construction, credit cards, event management and tour operators. Jaitley had proposed to raise the service tax rate to 14 per cent to facilitate a smooth transition to the Goods and Services Tax (GST) regime, which the government wants to roll out from April 2016. Once implemented, 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," Jaitley had said in Budget speech. Education cess, which is levied on service tax, will be subsumed in the service tax rate with effect from June 1. Although the Budget also proposed a 2 per cent Swachh Bharat cess on selected services, the government is yet to come out with a notification in this regard.