Service Tax to be Increased to 15% on June 1

Last Updated at: October 18, 2019

In Budget 2016, Finance Minister Arun Jaitley announced the Krishi Kalyan Cess of 0.5%, applicable from June 1, to bring service tax rate to 15%. The proceeds of the cess will be used to finance initiatives related to welfare of farmers and improvement of agriculture.

Just a year ago, the Finance Minister had increased the rate from 12.36% to 14% and, six months later, implemented the Swachh Bharat Cess of 0.5%. Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994.

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The government could raise the service tax rate to 18% over the coming two years, by which time it will have implemented the goods and services tax or GST.