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Budget raises service tax rate, widens base

Move comes as service tax collections decline steeply in FY15 against BE

BS Reporter  |  New Delhi 

Eating out, using a mobile phone and travelling by air are among the things that will cost more with the government announcing an increase in service The definition of services has also been widened to include more services in the net.

The announced an increase in service from 12.36 per cent to 14 per cent for 2015-16. The government, however, tried to soften the blow by saying that this would facilitate the transition to the Goods and Services (GST), targeted to come into force in 2016-17. The increased rate will come into effect once the Finance Bill is passed by Parliament and enacted into a law, which generally happens in June.
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This step will help the government earn 24.76 per cent more revenues from services at Rs 2.09 lakh crore in 2015-16 as against Rs 1.68 lakh crore in the revised estimate for the current financial year.

However, for 2014-15, services, which is a dominant sector of India’s economy, will yield much lower revenues than what was estimated earlier. The had expected that the sector would boost the kitty by Rs 21.59 lakh crore, but it is estimated that the collections would be 22.15 per cent lower than that.


 
In fact, even after increasing the rate and expanding the base, the government estimates its collections from service to be 2.9 per cent less in 2015-16 as compared to the Estimate of 2014-15. The education cess will be subsumed in the new service rate.

The negative list under the service will, meanwhile, be narrowed and certain exemptions withdrawn to widen the base. Amusement parks that offer rides, bowling alleys, amusement arcades, as well as water and theme parks would draw service Admission charges for entertainment events like concerts, non-recognised sporting events, pageants, music concerts and award functions would also be levied the tax, if the amount charged for admission is more than Rs 500.

Similarly, exemptions will be withdrawn on services provided by a mutual fund agent or distributor to a mutual fund or assets management company as well as by marketing agents of lottery tickets to a distributor of lottery.

Besides, an enabling provision will be made to empower the government to impose a Swachh Bharat cess on all or certain taxable services.

First Published: Sun, March 01 2015. 00:37 IST
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