SERVICE TAX

The share of the services sector in the GDP of India has been going upward for the last decade. The introduction of service tax in 1994–95 by the Government of India has started paying the government on its tax revenue front. Introduced to redress the asymmentric and distortionary treatment of goods and services in the tax regime, the service tax has seen gradual expansion in the country.

Introduced on only three serviecs, by now, the applies on more than 100 services. The rate of service tax has been increased by the Union Budget 2015–16 to 14 per cent inclusive of education cesses (it was 12.36 per cent inclusive of education cesses). The change has been done to facilitate a smooth transition to levy tax on services by both Centre and states, once India switches over to the GST by the next year. Other than imposing a 2 per cent Swachh Bharat Cess, the Budget has also put all services provided by the

government entities under the service tax net (both to be notified in coming times).

It is one among the 5 central taxes which are being subsumed20 in the upcoming indirect tax GST—which is slated for enforcement from July 2017.