New Delhi: Be ready to tighten your belts. Even as Finance Minister Arun Jaitley desisted from raising service tax, he announced a “Krishi Kalyan” cess of 0.5 per cent, which is to be levied on all services.
Result: The total service tax paid, including the new cess, will rise to 15 per cent. Eating out in restaurants, buying property and insurance, watching movies in theaters, payment of bills and making mobile phone calls will become more expensive from June 1, 2016. Advertising, air travel, services of architects, certain type of constructions, credit cards and event management are some of the services which attract this cess. All imported items will be costlier, too, as the budget has proposed an across the board hike of 5%-6% in the basic customs duty.
Incidentally, following changes in tax structure, cars, locally made mobiles, branded garments, air travel, aerated drinks, cigarettes and smart watches will also be costlier while footwear, solar lamps and routers are slated to cost less. Continuing the trend, Finance Minister Arun Jaitley came down heavily on smokers and tobacco consumers by imposing up to 15 per cent excise duty on all tobacco products other than beedi. Potential car buyers will also have to shell out more — from as less as Rs 3,000 to over Rs 1 lakh — on new purchases as the Finance Minister announced infrastructure cess of up to 4 per cent on vehicles.
Moreover, cars priced above Rs 10 lakh will also attract tax of 1 per cent at source. After the Budget announcements, air travel, too, will become expensive due increase in excise duty on aviation turbine fuel to 14 per cent from 8 per cent besides the additional levy of Krishi Kalyan cess. Soft drinks and mineral water will also be dearer as Jaitley proposed to hike excise duty on “water, including mineral water and aerated water containing added sugar or sweetening matter” to 21 per cent from 18 per cent earlier.
Branded readymade garments costing Rs 1,000 or more will become costlier as the excise duty on them has been increased to 2 per cent without CENVAT credit from nil earlier. Customs duty on imported imitation jewellery has gone up from 10 per cent to 15 per cent while customs duty on industrial solar water heater has increased from 7.5 per cent to 10 per cent which will make these items costlier. Locally manufactured mobiles will become costlier by about 1 per cent because the government has imposed duty on imported circuit boards used in them.
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Availing of legal services through senior advocates or legal firms will cost more as such activity will no longer be exempted from service tax with Jaitley proposing a levy of 14 per cent. Traveling by hiring air-conditioned stage carriage will also become more expensive as it will now come under service tax with a rate of 5.6 per cent. Smart watches will also be dearer as they will now be subjected to retail sales price-based assessment of excise duty with an abatement of 35 per cent.
Hiring of agency to pack and move household items while shifting premises will also become expensive as it will now attract a service tax of 5.6 per cent as against 4.2 per cent earlier. Lottery tickets will also become expensive as they will come in the service tax net, while imported e-reading devices will be dearer as they will now attract basic customs duty of 7.5 per cent, as against nil earlier. Hybrid electric vehicles are set to be cheaper as the engine will attract a lower excise duty of 6 per cent from 12.5 per cent earlier.
Microwave ovens made in the country will become cheaper as customs duty on a key imported component has been brought down to NIL from 10 per cent earlier. Sanitary pads napkins will also become cheaper as customs duties on key ingredients — wood pulp and super absorbent polymer — have been cut by 2.5 per cent. Low cost houses will also become even more affordable as Jaitley did away with service tax on construction services on dwelling units not exceeding 60 square metres under Pradhan Mantri Awas Yojana and any housing scheme of state government.
