Indore : It is a bad news for those who want to construct new houses. After 2 per cent hike in the Service Tax, construction of a house worth Rs 10 lakh would now cost Rs 5,000 more.
Similarly, rise in Service Tax will also hit hard hotel industry and air-ticket agents, which are already reeling under economic pressure.
While presenting the Union Budget-2015, Finance Minister Arun Jaitley made a proposal to increase rate of Service Tax from 12.24% to flat 14%. Though, the new rates won’t come into effect from April 1, it may come into force either from July 1 or October 1.
But, this rise will have severe impact on entire service sector, which is 55.2% of the GDP. But, the price rise won’t stop here as the FM has announced to impose levy of 2% of total taxable value under the service tax as ‘Swatcha Bharat Cess’. Though, the FM has not declared on what items and from what date it will be applicable.
Service Tax expert and president of Indore Chapter of ICAI CA Sunil G Khandelwal said that the effective rate of Service Tax in future will be 16%. It will create a whole new wave of price rise in the country.
Naveen Mehta, president CREDAI-Indore said that this rise would have negative impact on real estate sector, which is already facing recession.
CA Kandelwal said that Rs 5000 would be increased in the service of contractor if he built a house worth Rs 10 lakh. Mehta said this will hamper the state and Union governments’ bid to provide affordable home to everyone.
Sumit Suri, president of Indore Hotel Owners Association, said that the rise would have cascading effect on the hotel industry. The service tax is also applicable on the hotel rooms of Rs 1000 or above. Suppose the room rent is Rs 2000 then after the new tariff, the visitor would have to pay Rs 2020. This amount is not too much, but when an organisation books rooms in bulk, it will have to face the music. Instead of booking rooms, it will hold video conferencing, Suri added. It is noted that there are over 250 hotels in the city. Out of which, 100 are registered with the association and 20 hotels are 3-star and 3 are 5-star level hotels. This move will discourage the tourism.
TK Jose, proprietor of Jose Travel, a leading air ticket booking firm, said that the new initiative would further cut their margins, which are recently reduced by the airlines too. Ultimately, it will cut down the dream of having air journey for the middle class, Jose added.
