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Service tax net wider

GET READY to pay more for services. A clutch of services has been brought under the tax net and the service tax rate has been raised from 10 to 12 per cent. The effective service tax rate, after taking into account the 2 per cent education cess, will be 12.24 per cent. The fallout: many services are bound to become expensive. Internet, internet-telephone services like broadband, travel by cruise ships and travelling abroad on business-class tickets are bound to attract service tax.

india Updated: Mar 01, 2006 01:55 IST

No new taxes, plenty of projects, lots of concessions. Time to reach for the bubbly? Yes and No.


GET READY to pay more for services. A clutch of services has been brought under the tax net and the service tax rate has been raised from 10 to 12 per cent.

The effective service tax rate, after taking into account the 2 per cent education cess, will be 12.24 per cent.

The fallout: many services are bound to become expensive. Internet, internet-telephone services like broadband, travel by cruise ships and travelling abroad on business-class tickets are bound to attract service tax.

The transfer of money, either through draft, money order, postal order or online, by individuals will also be liable to tax.

Vendors who have set up ATMs with banks and financial institutions will also be covered.

Finance Minister P. Chidambaram proposes to rake in Rs 10,500 crore additionally through service tax. The services sector contributes 54 per cent to the GDP.

First Published: Mar 01, 2006 01:55 IST