Arun Jaitley may increase service tax from 15% as precursor to GST rollout

It is likely that Finance Minister Arun Jaitley will increase the service tax from 15% to at least 16% in the run up to Goods and Services Tax (GST) rollout.

During Budget 2017, Jaitley is expected to close gap with 18% GST rate as most of the services are likely to attract a tax of 18% under GST.

GST rollout is expected to happen on July 1 as stalemate over dual control continued in the GST Council meeting.

So, the government may slap a higher service tax for three months to somewhat offset the revenue loss after the GST kicks in.

As per industry experts, a service tax closer to the GST rate will give time to consumers to adjust to the new rate.

Service tax accounts for over 14% of Indian government’s total tax revenues. In 2016-17, Rs 231,000 crore service tax accounted for total tax revenues of Rs 16,30,887 crore.

The GST Council has agreed on a four-slab structure –5, 12, 18 and 28 percent—along with a cess on luxury and sin products such as tobacco.