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RATE AND CESS ON SERVICE TAX BUDGET IMPACT

Service Tax - By: - Dr. Sanjiv Agarwal - Dated:- 19-3-2015 Last Replied Date:- 21-3-2015 - The charge of Service Tax under the Finance Act, 1994 as amended so far is at the rate of 12 percent on the value of taxable services. This rate of Service Tax is specified in section 66B of the Finance Act. Presently the rate of 12 percent Service Tax is further subject to levy of education cesses as follows: Education Cess (EC) 2% Secondary and Higher Education Cess (SHEC) 1% These education cesses of 2% .....

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ary and higher education and related purposes. Budget 2015-16 The Union Budget speech in para 121 states as follows - Introduction of GST is eagerly awaited by Trade and Industry. To facilitate a smooth transition to levy of tax on services by both the Centre and the States, it is proposed to increase the present rate of service tax plus education cesses from 12.36% to a consolidated rate of 14% . Not only this, in case of excise duty also, it has been said in para 118 as follows - As part of th .....

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e levied separately. The Government will get the amount, in fact even higher amounts as tax or duty itself and not in the form of cesses. Thus, cesses will no longer be levied but assessees will end up paying a higher rate and amount of duty or tax. This is evident from following table. Tax / duty Present Position As per Finance Bill, 2015 Net increase Tax EC and SHE Cess Total Tax EC and SH .....

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to the extent of subsuming the quantum of education cess presently levied on them, keeping the total incidence of excise duties unchanged. Finance Bill, 2015 Clause 106 of the Finance Bill, 2015 seeks to amend section 66B so as to increase the Service Tax from 12 to 14 percent. Further, Clauses 179 and 187 respectively of the Finance Bill, 2015 provide that - Section 95 of the Finance Act, 2004 levying education cess, and Section 140 of the Finance Act, 2007 levying SHE cess shall cease to ha .....

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