Reminder: From tomorrow eating out, air travel will get costlier thanks to service tax hike

Entry tickets to museums, zoo and tiger reserves would become cheaper, while business class air travel, investment in MFs and chit funds would become expensive with some of the service tax proposals announced in the Budget coming into effect from tomorrow. Finance Minister Arun Jaitley had come out with a host of proposals last month to rationalise service tax, which is levied at an effective rate of 12.36 percent. These also include raising the rate to 14 percent, but that will come into effect from a date to be notified later by the government after the passage of the Finance Bill by Parliament. However, the proposals which will come into effect from April 1, 2015, include tax exemption granted to services like admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve. Similarly, life insurance scheme Varishtha Pension Bima Yojna, ambulance service, retail packing of fruits and vegetables, too will not attract service tax levy. [caption id=“attachment_1603237” align=“aligncenter” width=“640”]  Graphic for representation only[/caption] On the other hand, air travel will become expensive as service tax will now be levied on 60 per cent of the value of the ticket as against 40 percent now. “At present, service tax is payable on 40 per cent of the value of air transport of passenger for economy as well as higher classes, for example, business class. “The abatement for classes other than economy is being reduced and service tax would be payable on 60 per cent of the value of such higher classes,” said the memorandum to the Finance Bill, adding that the proposal will come into effect from April 1, 2015. Services provided by Mutual Fund agents, marketing of lottery tickets, departmentally run public telephone and free telephone calls from airport and hospitals will be subject to payment of service tax. With regard to chit funds, the service tax will be paid by the chit fund foremen at full consideration received by way of fee, commission or any such amount. They, however, would be entitled to claim Cenvat credit. As part of the rationalisation programme, construction services will be exempted from payment of the levy from April 1, 2015 if the service is provided to the government with regard to historical monument, irrigation work, water supply and sewage treatment plant. Exemption provided to construction, erection, commissioning or installation of original works pertaining to an airport or port will be withdrawn from April 1. Services provided by folk or classical artists will be exempted from the levy provided the amount charged is less than Rs. 1 lakh. Service tax exemption to transportation of ‘food stuff’ by rail, or vessels or road will be limited to transportation of foodgrains, including rice and pulses, flours, milk and salt only. The transport of other items, however, will become expensive. PTI