5 ways in which service tax hike is hurting your budget

5 ways in which service tax hike is hurting your budget

The 2 per cent rise in service tax has put additional burden on families as more services availed by households are now taxable.

The 2 per cent rise in service tax has put additional burden on families as more services availed by households are now taxable.

For airport pickup in a luxury car (Toyota Corolla), the cost has gone up by Rs 24. For airport drop in Maruti Dzire, the cost has gone up by Rs 8.

For half day, car rental companies do charge Rs 2,940 for a Toyota Corolla and with the previous service tax, the bill used to be Rs 3,061. This has now increased to Rs 3,085, an increase of Rs 24. Similarly, hiring a semi-luxury car like Maruti Dzire or Ford Fiesta to go the airport would now cost Rs 960 compared to Rs 952 earlier.

"People have been spared due to the 60 per cent abatement in taxes; otherwise, our business could have been severely affected. There is very minimal hike in cab fares due to the extra hike in service taxes as it has gone up from 4.12 per cent earlier to Rs 4.944 now," said a cab service provider.

The impact on airfares following the hike in service tax is much more. In the Delhi-Mumbai or Delhi-Goa sector, the additional burden due to service tax hike is Rs 245.

"Earlier, we used to charge Rs 155 flat for domestic airfare. Now, for the Delhi-Mumbai one-way airfare of Rs 8,000, the service tax works out to be Rs 400, which is an increase of Rs 245," said Anup Kanuga, director, Bhatija Travels.

The impact could have been much more had the government not provided the 60 per cent abatement. So practically, the consumer pays service tax on 40 per cent of the value of the service. So, instead of paying 12 per cent on a ticket of Rs 8,000, the flyer pays 4.9 per cent.

"Our clients do not object because taxes are mentioned in the ticket. But it is an additional burden. As fares are going up, the service tax burden will go up. On a Rs 15,000 ticket purchase in the last moment, the service tax component will be Rs 750, which means an additional burden of Rs 600," Kanuga added.
Telecom companies have begun passing on the hike in service tax to subscribers. Most of them are alerting users over mail or text messages.

Spokespersons of Vodafone India and Loop Mobile confirmed that the increase has been passed on to the user's end.

"This was expected as none of the operators had stated that they would be absorbing it," Ankita Somani, IT and telecom analyst with Angel Broking, said.

The service tax on DTH service on a monthly value package of Rs 158 has now gone up to Rs 18 putting an additional burden of Rs 3.20 per month on the subscriber.

"A middle-class family which spends Rs 10,000 on availing services on an average will have to spend Rs 100 extra per month as 50 per cent of all services are now taxable... extra taxes squeeze our margins," Shashi Arora, chief executive officer, Digital TV Services, Airtel, said.

Middle-class home buyers, especially in the metros, have been severely hit. The service tax of 12 per cent is levied on 25 per cent of sale price of all types of houses under construction.

Which means, if you buy a home for Rs 35 lakh, the service tax to be paid on the property will increase from Rs 87,500 to Rs 1,05000. Besides, for maintenance of a flat of 2,400 sq ft, the cost will go up by Rs 2 per sq ft.

"We are informing all buyers about the rise in service tax and the difference is being collected from customers since April 1. This (hike in service charges) is a government decision, and we have no option but to pass it on to our customers," Confederation of Real Estate Developers' Associations of India (CREDAI) president Lalit Kumar Jain said.

Courtesy: Mail Today