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Budget:Service tax raised from 10 to 12 percent


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New Delhi: Most services will become costlier as Finance Minister Pranab Mukherjee Friday proposed to raise the service tax to 12 percent from the existing 10 percent that will yield an additional revenue of Rs.18,600 crore.

“Looking at our vast commitments and to maintain a healthy fiscal situation, I propose to raise the service tax rate from 10 per cent to 12 per cent, with consequential changes in rates for services that have individual tax rates,” Mukherjee said while presenting Union Budget for 2012-13.

The finance minster said the proposed increase was expected to yield an additional revenue of Rs.18,660 crore.

“Keeping in mind that the share of services in GDP is 59 percent, you would agree that the proposed increase is not too harsh,” Mukherjee said.

He said all services except 17 are exempt – in financial jargon they are in the negative list – will be taxed.

Important inclusions in the ‘negative list’ comprise all services provided by the government or local authorities, except a few specified services where they compete with private sector.

The list also includes pre-school and school education, recognised education at higher levels and approved vocational education, renting of residential dwellings, entertainment and amusement services and a large part of public transportation including inland waterways, urban railways and metered cabs.

Services required for cultivation, breeding, production, processing or marketing up to the stage the produce is sold in the primary markets will also be exempted from the tax.

In addition to the ‘negative list’, there is a list of exemptions which include health care, services provided by charities, religious persons, sportspersons, performing artists in folk and classical arts, individual advocates providing services to non-business entities, independent journalists and services by way of animal care or car parking.

Mukherjee also proposed to raise the exemption for the monthly charges payable by a member to a housing society from Rs.3,000 to Rs.5,000.

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