At 14%, services will be pricier from June 1

Get ready to pay 14 per cent service tax from June 1. The Finance Ministry has notified the date for the higher rate, which was announced in the Budget.

The 14 per cent rate will be inclusive of an education cess. At present, the basic rate is 12 per cent and education cess is levied at the rate of 3 per cent of the basis tax, which takes the total rate to 12.36 per cent.

Service tax is levied on all services except those in the negative list. Over half the services that attract service tax also have abatement, which means that the tax will be levied only on a portion of the total value. There is no change in the abatement rules.

With no change in abatement, the percentage of value to be taxed will remain the same, but the effective rate of tax will go up. For example, air- conditioned restaurants are to charge service tax on 40 per cent of the bill amount, which works out to ₹4.94 on a bill of ₹100. This will rise to ₹5.6 from June 1.