SERVICE TAX RATE MIGHT INCREASE BEFORE INTRODUCTION OF GST

Finance minister Arun Jaitley is expected to hike service tax rates in order to bring closer to proposed GST regime. At the same time, the government needs to take steps for boosting local manufacturing and expand the tax payers’ base. 

Recently, the committee headed by chief economic advisor Arvind Subramanian has recommended a standard GST rate of 16.9 to 18.9%. Logically, no government would want to make such a steep increase in service tax rate at one go in a GST regime. Therefore the government may look at hiking the service tax rate before introduction of GST by 1-2% so that the further increase under GST regime would not look that steep.