Service tax raised from 10 to 12 per cent

By: | Updated: 16 Mar 2012 03:26 AM

Most services will become costlier as finance minister Pranab
Mukherjee on Friday proposed to raise the service tax to 12 per cent from
the existing 10 per cent that will yield an additional revenue of Rs
18,600 crore.

"Looking at our vast commitments and to maintain a healthy fiscal
situation, I propose to raise the service tax rate from 10 per cent to 12
per cent, with consequential changes in rates for services that have
individual tax rates," Mukherjee said while presenting Union Budget for

The finance minister said the proposed increase was expected to yield an
additional revenue of Rs 18,660 crore.

"Keeping in mind that the share of services in GDP is 59 per cent, you
would agree that the proposed increase is not too harsh," Mukherjee said.

He said all services except 17 are exempt - in financial jargon they are
in the negative list - will be taxed.

Important inclusions in the 'negative list' comprise all services provided
by the government or local authorities, except a few specified services
where they compete with private sector.

The list also includes pre-school and school education, recognised
education at higher levels and approved vocational education, renting of
residential dwellings, entertainment and amusement services and a large
part of public transportation including inland waterways, urban railways
and metered cabs.

Services required for cultivation, breeding, production, processing or
marketing up to the stage the produce is sold in the primary markets will
also be exempted from the tax.

In addition to the 'negative list', there is a list of exemptions which
include health care, services provided by charities, religious persons,
sportspersons, performing artists in folk and classical arts, individual
advocates providing services to non-business entities, independent
journalists and services by way of animal care or car parking.

Mukherjee also proposed to raise the exemption for the monthly charges
payable by a member to a housing society from Rs 3,000 to Rs 5,000.

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First Published: 16 Mar 2012 03:26 AM
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