New
Service Tax Impact
Budget 2012 has delivered
a staggering blow by hiking the service tax and excise duty from 10% to 12%.
So, if you were feeling thrilled at being able to take home a bigger salary, I am here to burst your bubble: your expenses are bound to go up too, more so since the service tax net has been widened to include almost all services that comprise a huge chunk of the household consumption basket. Only 17 items, such as essential education, public transport and services meant for agriculture, are exempt from this tax.
A good example of little gain on the tax front is your expenditure on health. Though preventive health check-ups for up to Rs 5,000 are exempt, a visit to the dentist or diagnostic tests will be more expensive due to the higher service tax levied on these. You will also be shelling out more on your life insurance policy.
The service tax on the premium for policies where the mortality charges are explicit has also been raised on the charges. For other policies, the service tax on the gross premium for the first year has been hiked from 1.5% to 3%, while subsequent premiums will be taxed at 1.5%.
Even the hike in excise duty and customs duty is going to bloat your expenses as manufacturers are bound to pass these on to the end-consumer. Be prepared to pay more on everything from cigarettes and cosmetics to watches and washing machines. If you were planning to buy a sedan this year, increase your savings as the duty on cars that are more than 4 m in length has been hiked from 22% to 24% and 27%, depending on the engine.
The good news: since these taxes are mostly levied on discretionary spends, not on roti, kapda and makaan, you could tighten your purse strings if you want. Here's a look at how much more you will pay every year as service tax and other indirect taxes.
So, if you were feeling thrilled at being able to take home a bigger salary, I am here to burst your bubble: your expenses are bound to go up too, more so since the service tax net has been widened to include almost all services that comprise a huge chunk of the household consumption basket. Only 17 items, such as essential education, public transport and services meant for agriculture, are exempt from this tax.
A good example of little gain on the tax front is your expenditure on health. Though preventive health check-ups for up to Rs 5,000 are exempt, a visit to the dentist or diagnostic tests will be more expensive due to the higher service tax levied on these. You will also be shelling out more on your life insurance policy.
The service tax on the premium for policies where the mortality charges are explicit has also been raised on the charges. For other policies, the service tax on the gross premium for the first year has been hiked from 1.5% to 3%, while subsequent premiums will be taxed at 1.5%.
Even the hike in excise duty and customs duty is going to bloat your expenses as manufacturers are bound to pass these on to the end-consumer. Be prepared to pay more on everything from cigarettes and cosmetics to watches and washing machines. If you were planning to buy a sedan this year, increase your savings as the duty on cars that are more than 4 m in length has been hiked from 22% to 24% and 27%, depending on the engine.
The good news: since these taxes are mostly levied on discretionary spends, not on roti, kapda and makaan, you could tighten your purse strings if you want. Here's a look at how much more you will pay every year as service tax and other indirect taxes.
ITEM
|
Expenses
|
Service Tax
|
Service Tax
|
10.30%
|
12.36%
|
||
TelePhone
Bills
|
12000
|
1236
|
1483
|
Coaching
Classes
|
24000
|
2472
|
2966
|
Eating
Out
|
20000
|
2060
|
2472
|
Gyms
|
12000
|
1236
|
1483
|
Car
maintenance and Repair
|
12000
|
1236
|
1483
|
Cable
TV
|
3600
|
371
|
445
|
HealthCare
|
5000
|
515
|
618
|
Life Insurance
Premium
|
6000
|
618
|
742
|
Functions
: catering , photographer etc
|
20000
|
2060
|
2472
|
Real
estate agent/ stock broker
|
10000
|
1030
|
1236
|
Salons
, courier , packaging services
|
8000
|
824
|
989
|
ITEM
|
Expenses
|
Service Tax
|
Service Tax
|
Old
|
New
|
||
Transportation : There hasn't been any change in
the road cess, which is charged on diesel and petrol. Its at 2 Rs/Litre.
Assuming petrol consumption at 1000 litres a year at 74 Rs/ Litre
|
74000
|
2000
|
2000
|
Jewellery: Prices will rise as customs duty
on gold and platinum has been hiked from 2% to 4%. While excise duty for gold
has been increased from 1.5% to 3%.
|
50000
|
1000
|
2000
|
Entertainment : No change in entertainment tax.
It still ranges from 15% to 40%
|
6000
|
1200
|
1200
|
Holiday : Hotel Stay for 5 days
|
25000
|
3125
|
3125
|
Holiday : Food and beverages at hotel
|
6000
|
618
|
742
|
Holiday
: Air Travel
|
20000
|
2060
|
24600
|
Holiday
: Train Travel
|
12000
|
Nil
|
1483
|
Holiday
: Tour operator /
Travel agent
|
3000
|
309
|
371
|
As you can see friends almost all areas are going to come under new tax regime.
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