Excise, service tax a spoiler for many items

Imported mobile phones, financial transactions to cost more, locally made electronic items, LED lights to cost less

Plan to buy a new mobile phone or a tablet computer? Be prepared to shell out more for an imported one, which most popular brands are. Budget 2015-16 has raised the excise duty on imported mobile handsets and tablet computers.

The excise duty on mobile phones has been increased from six per cent with Cenvat credit to 12.5 per cent with Cenvat credit.


The next time you replace a light bulb, go for an Indian LED one. These will be cheaper, thanks again to the reduction in basic customs duty for locally made goods. “The aim is to give incentives for manufacturing in India,” says Bipin Sapra, tax partner, EY.

At the same time, your monthly electricity bill could see a marginal increase, with the proposal to double the clean energy cess on coal.

Other items in your monthly budget that could see an increase are mineral water and aerated water, where the basic excise duty has been increased from 12 per cent to 18 per cent. For families with small children, monthly food bills could see a rise, since an excise duty of six per cent with Cenvat credit has been levied on peanut butter and condensed milk. Earlier, these were exempt.

Those with cardiac problems will benefit, since artificial hearts (left ventricular assist devices) have been exempt from basic Customs duty or five per cent. Agarbattis (incense sticks) have also been fully exempt from excise duty.

Leather footwear could be cheaper, as excise duty has been reduced from 12 to six per cent on footwear costing more than Rs 1,000.

The biggest impact on the monthly budget will be in the rise in spending on the services you avail, due to the increase in service tax from 12.36 per cent to 14 per cent. This will lead to a rise in your mobile bills, restaurant bills, salon or spa treatments, coaching class fees and so on.

There is also an enabling provision to add a Swachh Bharat Cess of two per cent. If introduced, service tax could rise to 16 per cent.

Even insurance premiums and brokerage charges will go up as a result of the rise in service tax. “The increase in service tax is likely to have an impact across services. The direct impact will be seen in financial transactions,” says Rajesh Srinivasan partner, Deloitte Haskins & Sells LLP.

A day-long trip to a water park or amusement park will also cost you more, since it has been brought under the service tax net. Service tax has also been widened to include entertainment and sports-related events. Service tax will also be applicable on non-recognised sporting events, music concerts and award functions if the amount charged for admission is more than Rs 500. Movies, circus or drama performances and recognised sporting events will be exempt.

Booking a radio cab through a mobile app, which earlier did not attract service tax, has now been brought under its net, says Sapra of EY.

Business and first-class air tickets could also see an increase in price, since service tax will be payable on 60 per cent of the value of the fare in such cases.

Broadly, any goods transported by road will see an increase due to rationalisation of the service tax, though this might not translate into much for the end-customer.