Budget 2015: Tax breaks for middle class, but hike in service tax may pinch consumers

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New Delhi, Feb 24: This year's budget session would be concentrating mainly on the middle class, as per the Lok Sabha election agenda of the NDA. Likewise, it is said that Finance Minister Arun Jaitley is likely to provide tax breaks for the middle class in the upcoming Budget. However, there is a rising fear that the government may hike service tax to compensate for the shortfall in revenue.

According to sources in KPMG, service tax may be hiked to 14% in this Budget. This means, eating out in restaurants will become expensive. Some of the other services that are getting costlier will include consultation with lawyers, gym membership, and club membership.

Tax

The hike is more likely as the Government is planning to take a step forward toward the implementation of the Goods and Services Tax with effect from April 1, 2016.

Pratik Jain, partner (tax) at KPMG said,"Service tax is going to go up if GST is implemented. Today the service tax is 12 per cent, it is going to move to 16-17 per cent when GST comes in. It will be difficult for the government to increase the service tax at one point of time. So it should be gradual."

Experts believe that this hike would mean an extra Rs. 30,000-Rs. 35,000 for the government.

But there is some good news too. The implementation of GST may lead to lower prices of manufactured items as taxes will go down for such products. This will make purchase decision easier as the prices will remain the same irrespective of place.

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