The finance minister has refrained from tinkering with service tax rates. Service tax generated tax revenue of over Rs. 97,579 crore in the financial year 2011-12, and has emerged as an important source of revenue in the last few years.
However, service tax already saw a two
percentage point rise in Pranab Mukherjee's last budget in 2012. The tax base was also considerably broadened.
The finance minister has not provided the much awaited clarity on introducing Goods and Services Tax (GST), which could be a major reason behind the retention of service tax rate.
"Any increase in the rate of service tax at this point would have created distortion of tax rates in relation to the excise duty rates, and would have made services more costly for the end consumer," said financial consultancy firm Deloitte.
Industry leaders are also happy.
"We are happy that the component remained untouched," said Adi Godrej, chairman of the Godrej Group and president of industry chamber CII.
"The more he would have played with the service tax rate, more pressure would have built on GDP growth and output."