The hike in tax will push up retail prices of almost all everyday products and services – from restaurant meals and movie tickets to telecom services.(File Photo)
The hike in tax will push up retail prices of almost all everyday products and services – from restaurant meals and movie tickets to telecom services.(File Photo)

Budget 2016: Tax blow may bring down aam aadmi’s leisure outings

Fine dining, movies, a visit to the gym or a beauty parlour is set to get costlier with the government proposing a 0.5% cess on all taxable services.
By HT Correspondent, New Delhi
PUBLISHED ON MAR 01, 2016 12:50 AM IST

Fine dining, movies, a visit to the gym or a beauty parlour is set to get costlier with the government proposing a 0.5% cess on all taxable services.

This is the third time that the effective rate of service tax has been increased since February 2015. While presenting the 2015-16 Budget, finance minister Arun Jaitley had increased the rate from 12.36% to 14% and from November 15, 2015 had added the Swachh Bharat cess of 0.5%, taking the effective rate of service tax to 14.5%. With Monday’s announcement the service tax rate will be 15% starting June 1.

“I propose to impose a cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services, proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers,” said Jaitley.

“The cess will come into force from June 1,” he said.

A higher service tax will pinch households. Telecom services, electricity and mobile bills too will get costlier.

The hike in tax will push up retail prices of almost all everyday products and services – from restaurant meals and movie tickets to telecom services.

Lottery tickets will also become expensive as it will be included in the service tax net.

“The indirect tax proposals announced as part of the Union Budget consist of a diverse bag of changes and several new cesses,” said MS Mani, senior director, Deloitte.

Meanwhile, the government provided succour to two sectoral watchdogs from service tax. The government said that it will exempt “regulatory services” provided by Securities and Exchange Board of India (Sebi) and Insurance Regulatory and Development Authority (Irda) from the service tax ambit.

Besides these, exemption would also be extended to the services provided by the Employees’ Provident Fund Organisation (EPFO).

Currently, these service attract a tax of 14%.These exemptions will be effective from April 1, 2016.

The move comes after uncertainties on whether Sebi’s regulatory services can be taxed, especially after the government moved to negative list for service tax few years back.

Among others, the service of life insurance business provided by way of annuity under the National Pension System regulated by Pension Fund Regulatory and Development Authority (PFRDA) has also been exempted from the tax ambit.

At present, the service tax in this regard was 3.5%. Jaitley also reduced service tax on single premium Annuity Policies from 3.5% to 1.4% of the premium paid in certain cases.

Jaitley further proposed to exempt service tax on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana and services provided by Assessing Bodies empanelled by Ministry of Skill Development and Entrepreneurship.

He also gave a service tax boost by exempting this tax on construction of affordable houses up to 60 sq metres under any scheme of the central or state Government including PPP Schemes.

Jaitley also exempted service tax for General Insurance Schemes under Niramaya Swasthaya Bima Yojana.

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