Service tax hike will hurt most

In addition to 14% tax, a Swachh Bharat cess of 2% will be levied

128 Slice CT Scan installed at KG Hospital in Coimbatore on February 10, 2011. Visualisation of medical images of CT Scan in 3 D is Complete and Comprehensive as it combines pathological Anatomy at depth with surface information. Photo:M. Periasamy

Your cable TV bill, a hair cut at the saloon, eating out at restaurants, diagnostic tests, visits to amusement parks, ticketed concerts (if the cost of ticket is above Rs. 500) and mobile and telephone bills, among other things, will be costlier, with the Union Budget increasing service tax from 12.36 per cent to 14 per cent.

According to D.G.V.P. Sekar, chief coordinator, Federation of Cable TV Associations of South India, a person paying, say, Rs. 300 a month as cable TV charges, will soon have to fork out an extra Rs. 42 per month as service tax.

Hoteliers, who were hoping the Central government would do away with service tax, are aghast over the increase.

“Already, value added tax is being collected. This is double taxation. The industry has been suffering due to increase in inputs. We will have to pass this on to our customers. There has been an increase in basic excise duty — from 12 per cent to 18 per cent — on soft drinks and aerated drinks, which means their costs will go up too,” said R. Srinivasan, secretary, Tamil Nadu Hotels Association.

Condemning the increase in service tax on telecom services, S.M. Chellasamy of Tamil Nadu Senior Citizens Welfare Association said, as far as the basic telephone is concerned, when BSNL collects rent for the instrument, there is no need for levying of service tax. “We wanted senior citizens to be exempted from the service tax,” he said.

Tax consultant B. Sriram said select services will also get a Swachh Bharath cess of 2 per cent on the value of service, in addition to the 14 per cent tax. This means some services will be costlier by 16 per cent.

Mr. Sriram said the rationale for this could be the government’s desire to scale up the tax gradually. The proposed goods and services tax (GST) in 2016 could be anywhere between 16 per cent and 20 per cent, and then it will seem like a steep hike from the current service tax of 12.36 per cent.

Wholesale merchants in the city said the Budget announcement that GST would be implemented next year has been disappointing.

Praveen Mehta, president, Federation of Madras Merchants and Manufacturers Association, said increase in service tax will not have cascading effect on prices of food items as the hike is minimal.