Air travel, insurance feel service tax heat
Get set to pay up to 10 per cent more for dining out, flying within the country or outside, visit to a doctor or even on your life insurance cover, courtesy the growing ambit of service tax in the country. All this is in exchange of just `20,000 increase in Income Tax exemption limit for normal taxpayers. However, it is estimated to result in net revenue gain of `4,000 crores to the government.
Finance minister Pranab Mukherjee’s budget for 2011-12 presented on Monday, also levies a Service Tax of five per cent on hotels charging `1000 per day per room. Dining out in an air-conditioned restaurant serving liquor or a pub will cost three per cent more.
Domestic air travel too got dearer by `50 while international air travel will entail extra expenses of `250 by economy class. Passengers travelling by business or first class on domestic routes will now pay 10 per cent more, at par with journeys by higher classes on international air travel. These increases will be effective from April 1.
Healthcare too will become more expensive as the finance minister has levied a service tax on air-conditioned hospitals with minimum 25-beds facility and club services to non-members have also been covered.
Education too, became costlier as even coaching institutes offering non-recognised courses, will be brought under the service tax net.
This is in line with transition to Goods and Service Tax (GST), wherein barring few services, everything will have to come under the service tax net once GST is implemented.
“The idea behind bringing in more services into the tax net is to align service tax with GST. Under the Goods and Services Tax it is proposed to bring all services into the tax net barring a small negative list,” revenue secretary Sunil Mitra said.
However, exemption is being given on business exhibitions held outside India, services provided within a port for specified services under the “works contract” service. All construction under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Rajiv Awas Yojana, pertaining to low cost housing will be exempt from service tax. Club membership fees under ‘club or association service’ to industry chambers from June 16, 2005 to March 31, 2008 will also be exempt from service tax.
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