CA Sandeep Kanoi
From Media news it is learnt that Finance Minister may raise rate of service tax from 12% to 14% in its Budget for 2014-15 to be presented in Lok Sabha on 10th July 2014. It will be a challenge for the finance minister to Increase the rate of service tax when economy is already reeling under the pressure of Inflation.
Increase in Service Tax Rate means further increase in Inflation. Service tax rate was last increased to 12.36% from 10.30% wef 01/04/2012.
We are producing below the changes in Service Tax Rates from time to time since introduction of Service Tax in India.
SERVICE TAX RATE CHART SINCE INTRODUCTION OF SERVICE TAX IN INDIA
| Period | Basic Rate | Cess | Higher Education Cess | Gross Rate |
| 01/07/1994 To 13/05/2003 | 5% | 0% | 0% | 5% |
| 14/05/2003 To 09/09/2004 | 8% | 0% | 0% | 8% |
| 10/09/2004 To 17/04/2006 | 10% | 2% | 0% | 12% |
| 18/04/2006 To 10/05/2007 | 12% | 2% | 0% | 12.24% |
| 11/05/2007 To 23/02/2009 | 12% | 2% | 1% | 12.36% |
| 24/02/2009 To 31/03/2012 | 10% | 2% | 1% | 10.30% |
| 01/04/2012 To DATE | 12% | 2% | 1% | 12.36% |
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Thanks for service tax rate chart. Please make correction in the chart as 10/09/2004 To 17/04/2006 10% 2% 0% = 10.2%.
Government has already burdened the society by increasing not only service tax rate but also bringing so many services under the net. Further, the service tax is not only imposed on the service rendered but also other components. Ex, Service tax is imposed on total wages paid to the workers through the contractor including service charges payable. Here the concept of service tax should be tax on service charge but the government against to natural justice is charging service tax not only on cost of service rendered but also the wage component which is totally wrong.
@ Dr Arun D
Points to ponder:
From he viewpoint of account/deposit holder, two things requiring to be focused on:
1. According to one’s information, –
all banks do not resort to such objectionable charges for debit card, ATM, facilities provided /availed of. Practices so vary resulting in lack of uniformity.
The semi-regulatory authority has left it to individual banks to decide, instead of conceiving of and implementing any regulatory measures. Banks, left to selves, therefore, assume unbridled powers /rights to self-centric practices, always plainly motivated to improve upon the so called ‘bottom line’; more often than not, in the process, paying no heed to the genuine grievances of the ‘serviced’, who in the ultimate analysis are expected to be given due regard / concerns as ‘masters’ ,- though not in the sense of master-servant relation ship. Every service provided is nothing but that expected to be provided in the normal and natural course, hence no special service justifying a special charge, more so not reasonable but out of proportion, not commensurate in principle, and excessive.
2. Service tax on any ‘service’ , not merely banking, is primarily a levy on the service provider, with no precondition attached or envisaged by the law that it HAS to be passed on to and necessarily borne by the ‘serviced’. In short, the ongoing practice of passing on each one of such levy, as a matter of routine, to the ‘serviced’ cannot, in one’s conviction,lawfully be justified by making it a rule of the game.
For an elaboration of these aspects,the viewpoints dilated and placed in public domain may serve as an eye-opener.
Did the Government think of the atrocious extent to which the Service Tax could extend to. The relationship between an account holder and a bank is that of a principal and agent. The account holder issues a cheque which is a demand instrument. The bank dishonours it on a silly ground of ‘signature not tallying’, without correctly checking the records. The bank charges him service charge of Rs. 100, not for a service rendered but a dis-service rendered and on top of it a service tax of Rs. 14.
The belief underlying the most fundamental of all fundamentals in the realm of taxation comes to one’s mind. That is the principle of interpretation of a tax statute/its provision,that has found favor and judicial acceptance in certain decided cases; which is to the effect that tax and equity are strangers. But one never thought that would come to be increasingly subjected to violence with the passage of time; such that,equity (fair play) and taxation are now believed or regarded to be a sworn enemies.
Recent events, besides the indicated likely increase in the ubiquitous modern times levy of service tax, e.g. the hike effected in railway fares with only a short time to go for presentation of a formal railway budget does not speak well of the newly elected men in governance.
As is said, of course, all such turn of events / happenings, inevitable or otherwise,even as men may come and go, seem to be per-ordained,not in any case being within the control of ordinary humans; no option but only to take in the stride, without a whimper or whisper ; especially, so long as ‘low arousal’ is largely regarded as a virtue !
Now it is clear that Modi Sarkar is also a “tax greedy” government.Finance Minister just couple of days back announced that populists measures should be curbed. It means he wants to reduce government’s expenditure on so called welfare activities.One would have hoped that he would reduce taxes. Now he says that he wants to increase revenue by increasing service tax rate from 12% to 14% only because it is sure source of revenue.[He contradicts himself]. I don’t see any rational behind hike in service tax rate. He does not talk about reduction in government expenditure so that taxes can be reduced. The only principle is that “More you collect taxes, More you can spend as you wish”. It is the only area where “Political Will” finds its way.
Service Tax Rate is quiet high even now at 12.36% Furhter increase will not go good with the people. Its a BAD decision I think. Also service tax levied on many things which cannot actually be termed as a service like telephone and mobile, real estate is wrong. If this government continues to hike this tax, people will stop trusting this govt. also. The limit for small service tax providers should be increased to 25 Lakhs from 10 Lakhs infact. The burden of taxes for small tax payers is already too much !!
Burden will be on employees of the companies coming under service tax net. Majority customers/clients are not interested in paying service tax and many service providers are paying the tax out of their margin. When tax rate increases, this will affect the cash flows and ultimately the benefit to employees will get cut down. Again, the limit or Rs.10.00 lacs is too low considering the wide range of services to which service tax is applicable after negative list implementation. It would be a benefit to service providers if the basic exemption limit is increased to say Rs.25 or 30 lacs.
Modi Govt speaks of containing inflation. But it has taken a wrong decision of increasing of freight fares already. Increasing Service tax rate (rather than reducing) will only be quixotic and only add fuel to fire. The approach of the Govt will ultimately hinder achievement of it main objective of containing inflation.
A retired person living on rental income will have to pay service tax ( at present) 12.36 + 30% (income tax) so his 42.36% are gone in taxes. The Modi Govt should think about salaried persons and retired persons (senior citizens) who have no other income for taxation.
Whereas the business man can show losses in his firm to avoid income tax and there is depreciation for him if he buys a new car to. All this should be taken into consideration too
Dear sir,
Already we have burden in Service Tax this will not be satisfied between corporates. and the service burden also raised from 01.07.2012 onwards for Reversal Charge of Mechanism.
And I suggest since we are remitting Service Tax for Actual and Reverse Charge we are very much loss.
This Service Tax Rate Can be reduce from 12.3% To 10.3%.
in Creasing THE RATE OF S.T. WILL BE BURDEN TO SOCIETY AND NOT STOP TO HIKE OF PRICES, IT WILL NOT BE A GOOD DECISION OF MODI SARKAR.
THINKS ABOUT UN-ORGANIZED SECTOR EMPLOYEES’S POCKET NOT ONLY GOVT. EMPLOLYEES THEY ARE ALREADY EARNING MORE DOUBLE PAY COMPARE WITH PRIVATE SECTOR EMPLOYEES.