If my memory serves me right, our Fin Minister announced an year back that service tax will go up to 16% by the year 2010, which is set as the deadline for introduction of GST Act in India. So the time has come for India Inc to get ready for another hike in service tax.

A journey which began in the year 1994 with just 3 services and revenue of 410 crores now forms major part of government revenue. In such a short span of time, contribution of 14196 crores to the corpus in the year 2004-05 is really incredible. Furthermore, introducing 44 more services in this year budget will widen the scope of service tax. In Toto it brings 121 services in the service tax net.

It is expected that the service tax rates will go up to 14% in this year budget.

At presents the rates stand at 12%. An education cess of 2% makes it 12.24%. So, Corporate India is definitely going to feel the pinch of it. Well! Let me correct it. The ultimate burden of Service tax is to be borne by consumer, as it is an indirect tax. So it is consumer at large who should be prepared to shell out an extra penny due to increase in the rates.

Don’t be amazed if one fine morning there is a negative list to bring everything except a privileged few services under the net of service tax. If everything goes on as planned by 2010, India will replace service tax by GST .The main idea behind phase-out of CST is seen as part of a strategy to eliminate multiple taxes and move towards a uniform tax policy — the proposed goods and service tax (GST).

Popularity: 1% [?]