Higher service tax makes mobile, eating out, travel expensive

Mobile operators and credit card companies have already sent messages to subscribers conveying the increase in service tax rate.

Eating out, mobile phone usage and air & rail travel have become expensive from Monday with the government hiking service tax rate to 14 per cent.

The government’s proposal to increase the rate of service tax from 12.36 per cent (including education cess) to 14 per cent has come into effect from Monday.

The service tax is levied on all services, expect a small negative list.

Some of the key services that attract higher tax and have become costlier include, rail and air travel, banking, insurance, advertising, architecture, construction, credit cards, event management and tour operators.

Mobile operators and credit card companies have already sent messages to subscribers conveying the increase in service tax rate, which will have a bearing on the bills.

Fares for First Class and AC classes in passenger trains, besides freight charges, have increased by about 0.5 per cent.

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, has been subsumed in the service tax rate.

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.