Service tax increased to 12 % -Effective from April 1

Service tax increased to 12 % -Effective from April 1

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Asia Bizz: The budgetary proposal of raising the service tax to 12 % has come in to affect from April 1, 2012 in India. Hereafter, restaurant bills, telephone bills, and similar activities will cost more. Finance Minister Pranab Mukherjee increased the service tax from 10% to 12%. The move has been taken by the minister in order to garner an additional Rs 18,660 crore during 2012-13.

The proposal will affect many services including travel by air conditioned rail coaches, courier services, coaching classes and other such services. There are more than 120 services which attract service tax and this has come in to effect from April 1, 2012. Such services include the following – cable operator, air travel, life insurance, beauty parlour, credit card, credit rating, advertisement, dry cleaning, health clubs and other such services.

The finance minister, as part of his budget speech last month, said that he proposed to raise the service tax from 10 percent to 12 percent so as to yield an additional revenue of Rs. 18,660 crore.

During the current financial year, the government proposes to collect about Rs 1.24 lakh crore through service tax, which is up from Rs. 95,000 crore during 2011-12. Pranab Mukherjee proposed a negative list so as to expand the base of the service tax. The notification of the list would be issued later. The negative list has mentioned that service tax will be levied on all services except those mentioned in the list.

For the time being, tax is levied on the basis of the positive list, which clearly means that it applies only on specified services. The negative list of services, on which the service tax of 12% will not be levied, includes access to amusement facilities, admission to entertainment events, auto rickshaws and travel by radio taxis. The other services which have been exempted include burial, funeral,  and transport of deceased.