New Delhi: Having noted that service sector contributed as much as 54 per cent of the GDP, Finance Minister P Chidambaram has proposed to raise service tax rate from 10 to 12 per cent and widen the net to double the collections to Rs 34,500 crore in 2006-07.
Now, read the fineprint to check out where has it hit you.
While the Finance Minister has left the personal taxes or corporate income taxes unchanged, he has hit both the categories indirectly by raising the services tax rate.
Now, you would be paying a little more to dine outside or buy luxury goods. You would pay more towards service tax on your mobile bill, that is a cool 2 per cent more. You would now pay a service tax of 12 pc if you use your ATM to make bill payments or if you use credit cards.
If you are a stockmarket investor, you would need to pay a little more as the securities transaction tax (STT) has been raised by 25 per cent.
The cash transaction tax, too, has been retained.
The Finance Minister has brought 15 new services in the service tax net. Apart from ATMs, the new areas include share transfer agents, registrars, sale of space for advertisement other than in print media, sponsorship of events other than sports, international air travel other than economy class, public relation (PR) services and internet telephony, among others.
Credit card, debit card and other payment card-related services have been brought under the service tax net.
The minister has withdrawn exemption from service tax to six services including call centre, re-insurance premium received from both domestic and overseas and others.
This would come into effect from Wednesday.
Chidambaram exempted all taxable services provided by Reserve Bank of India from service tax liability.
During 2005-06, government is likely to collect Rs 23,000 crore (revised estimates) against the Budget estimate of Rs 17,500 crore from service tax.
Now, the increased service tax rate would be applicable from the date of enactment of Finance Bill 2006, he said in his Budget 2006-07 presentation.
With Agency inputs
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