India Service Tax rise to 14% ahead of 2016 GST launch

Mon 2nd Mar 2015

The latest Indian budget released this weekend includes a potential rise in Service Tax from 12.36 to 14%. The moves comes ahead of plans to scrap Service Tax, VAT and other Indian consumption taxes with the implementation of Indian GST in 2016.

Service tax is levied on a range of consumer services and administered by the Central Government. Services include real estate, credit card services, retail services and insurance.

It was introduced in the 1990’s to tax services that are excluded from VAT. It is made up to 12% Service Tax + 3% CESS education levy which is compounded on the Service Tax to give an effective rate of 12.36%.

With the move to 14%, CESS will be fully incorporated into the Service Tax. This rise is part of the transition to GST, which is expected to be launched at a headline rate of up to 18%.

The budget on 28 February also announced plans to cut the main corporation tax rates from 30% to 25% over the next four years.