Service Tax Rate increased to 14% w.e.f. 1st June 2015

President Pranab Mukherjee has given his assent to the Finance Bill, 2015, which was notified on Tuesday.

The finance ministry on Tuesday notified increasing service tax from current 12.36% to 14% with effect from 1st June 2015 (Notification No. 14/2015-ST  dated 19th May, 2015). This will make a host of services including mobile bill, air fare, insurance premium, DTH bill, eating out, dry cleaning, services of chartered accountant, services of architect and courier service among others costlier.

The government is also proposing to impose another two per cent Swachh Bharat cess on the services. This will be notified at a later date. Also the proposal to impose service tax on government services provided to business will be notified in future.

Some more services will be brought under the ambit of service tax from 1st June 2015. From next month, service tax will be levied on the service provided by way of access to amusement facility providing fun or recreation by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks and theme parks.

Also service tax will be levied on service by way of admission to entertainment event of concerts, pageants, musical performances concerts, award functions and sporting events other than the recognised sporting event, if the amount charged is more than Rs. 500 per person for the right to admission to such an event.

However, service tax will not be imposed on exhibition of cinematographic film, circus, recognised sporting event, dance, theatrical performance including drama and ballet.

The finance minister in his budget speech had said that to facilitate a smooth transition to levy of tax on services by both the Centre and the States, “it is proposed to increase the present rate” of service tax plus education cess from 12.36 per cent to a consolidated rate of 14 per cent.

However, the implementation of GST will see service tax being increased steeply further. There had been reports that GST rate could be 27 per cent.  However, Mr Jaitley had said that GST rate will be “much more diluted”.

Effective Service Tax Rates for various services w.e.f. 1st June 2015:

  • GTA Transports – 4.2%
  • Builder Residential – 3.5%
  • Builder Commercial – 4.2%
  • Civil Contractor with Material – 5.6%
  • Erection/Elctr with Material – 5.6%
  • Repair Maintenance of Bldg or goods – 9.8%
  • Lodging – 8.4%
  • Restaurant – 5.6%
  • Catering – 8.4%
  • Hall with Catring-9.8%
  • Vehicle Rent – 5.6%

Corresponding changes in Rules 6 of Service Tax Rules, 1994 for increase in rate of Service Tax for following will also be applicable w.e.f. 1st June, 2015 (Notification No. 15/2015-ST):

  • Air Travel Agent,
  • Life Insurance Business,
  • Foreign Exchange Brokers and
  • Distributor & Selling Agent of Lottery.
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