Budget hikes tuition fees too
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Budget hikes tuition fees too

By raising service tax from 5 to 8 pc and throwing tax net over 10 more services, Budget has made some everyday services dearer.

india Updated: Jun 19, 2004 14:12 IST

For all you folks thrilled about the tax breaks and price cuts in consumer durables, courtesy the “middle-class” budget, here’s a word of advice: read the fine print.

By raising the service tax from 5 to 8 per cent, and throwing the tax net over 10 more services, Finance Minister Jaswant Singh has made some everyday services dearer.

So when you pay your child’s fees at the local cram class, or enrol him in a computer training institute, visit an Internet cafe or enter into an annual maintenance contract for your PC or AC, you can bet your last rupee you are going to end up paying more.

The budget takes the total number of taxable services to 61. In the 51 existing services that are currently being taxed at 5 per cent, the increase will come into effect from April.

Take, for instance, your monthly mobile phone bill. If it's Rs 1,500 now, you are paying Rs 75 as service tax. With the 8 per cent impost, you will shell out Rs 120 from next month. Ditto for car servicing, landline phone and cable TV bills.

Says an analyst: “While Singh has placed more money in middle class hands to spend through a softer tax regime, much of the gains slip away due to the hike in service tax and the widening of the list of services.”

And though the Centre hopes to net more revenues, people have already found ways of beating the levy — under reporting and non-bill deals.

The budget is bad news for the IT training sector. Already in a slump, this sector fears the worst. A student who put down Rs 30,000 for an IT course, may be asked to shell out at least Rs 2,400 more.

“The 8 per cent tax on coaching and franchising services will add to the burden of IT training industry," says Aptech CEO Pramod Khera. NIIT officials, however, hope that the provision will be diluted.

However, contrary to news reports, the Finance Bill is clear about leaving out the crucial IT-enabled services from the service tax net.



<i>Services to be taxed from June ’03</I>

* Vocational institutes, coaching centres and private tutorials

* Maintenance and repair services

* Business promotion, customer care services

* Internet cafes; forex brokers

* Technical inspection and certification

First Published: Mar 06, 2003 00:00 IST