The Federation of All Trade and Industry Associations has asked the Union Government to defer implementation of the raise in service tax until the Goods and Service Tax is implemented. Federation president N. Sivanesan said that the raise in service tax will inevitably lead to increase in production costs, and cause inflation.
For, raw materials transported by road and railway from other States invites the enhanced service tax.
Inflationary
Product cost will increase by at least 25 per cent, he explained.
At a time when trade and industry organisations had been expecting a decrease from the earlier existing level (12.36 per cent) to 8 per cent, the increase to 14 per cent was disappointing, Mr. Sivanesan said.
The increase in service tax rate will hit the common man hard, as the business community will inevitably pass on the burden to customers, C.S. Gowthaman, a silver trader and senior functionary of Tamil Maanila Congress, said.
For middle class families, dining at restaurants, the only entertainment in the district, will no longer be affordable, he said, calling for confining the tax rise only to star hotels.
There was no logic in putting additional tax and interest burden on people making purchases with credit cards. Likewise, construction of houses will be out of bounds for middle class families, due to the additional rise in service tax, Mr. Gowthaman said.
