Banking, insurance, travel going to be expensive due to service tax

TDS will apply on interest income exceeding Rs 10k, cabs, metro not in tax list

GN Staff | June 1, 2015


#service tax   #deposits   #tickets   #banking   #insurance  


Savings will be taxed so will be spending. From Monday most of the services one buys will attract enhanced service tax of 14% and TDS (tax deducted at source) is going to charged on all kinds of FDs and RDs (fixed deposits and recurring deposits). TDS will apply on interest income exceeding Rs. 10,000.


Service tax is applicable on almost all services. Some of the services that are going to be expensive due to tax are: railway and airline tickets, banking, insurance, advertising, construction, credit cards, event management and tour operators.

The Centre aims to collect around ₹2.10 lakh crore through service tax, about 32 per cent of the total indirect tax target, which is 24.7 per cent higher than the revised estimate of 2014-15. Keeping this in mind, the tax authorities have decided to collect the hiked service tax from June 1, instead of July 1 in previous years.
According to railway ministry officials, fares for First Class and AC classes in passenger trains, besides freight charges, will go up by 0.5% from June 1.

 Finance minister Arun Jaitley in his budget had proposed to raise service tax from 12.36% (including education cess) to 14%. The proposal takes effect from June 1.

Hike in service tax is to facilitate a smooth transition to the goods and services tax (GST) regime, which the government wants to roll out from April 2016. The GST will subsume service tax, excise and other local levies. Education cess, which is levied on service tax, will be subsumed in the service tax rate with effect from June 1.
The budget had also proposed a 2% Swachh Bharat cess on selected services but the government is yet to notify the cess.

Life and general insurance premiums could go up as a result of the additional service tax. Life insurance premiums currently attract service tax at 3 per cent in the first year and 1.5 per cent of the premium charged in the subsequent years. For all traditional life insurance plans, service tax rate will increase from 3 per cent to 3.5 per cent for first year premiums and from 1.5 per cent to 1.75 per cent for subsequent years' premiums.
Similarly, for all other insurance products such as general insurance and unit linked insurance plans the applicable service tax will go up from 12.36 per cent to 14 per cent.

Services that will not be taxed

Education remains a priority sector for the government. So, pre-school education and education up to higher secondary school or equivalent remains out of the service tax net. Likewise, certain common transportation modes such as metered cabs, auto rickshaws, metro and monorail are kept out of the service tax net.
 

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