The Krishi Kalyan Cess of 0.5% on services imposed by Finance Minister Arun Jaitley comes into force from Wednesday through which the government proposes to collect Rs 5,000 crore during the remaining 10 months of the current fiscal.
This will increase a host of services, which include -- telephones, restaurants, cinemas, visits to beauty parlours, air travel, insurance, DTH, credit and debit cards, courier, healthcare, banking and professional consultancies.
The total service tax collection target has been pegged at Rs 2,16,000 crore during the current fiscal. In addition, the government intends to collect Rs 10,000 crore from the 0.5% Swachh Bharat Cess and Rs 5,000 crore from Krishi Kalyan Cess.
Earlier, there were two other cess under the service tax net -- education cess and secondary and higher education cess. These were rationalised and subsumed into the overall service tax rate of 14%.
Though the Krishi Kalyan cess is only 50 paise per Rs 100 of transaction, on a larger scale the proceeds could fetch more than Rs 5,000 crore, finance ministry officials said.
The officials said the increase in the service tax rate is part of the effort to bring it on par with the expected rate of goods and services tax (GST) of 17-18 %.
In the 2015-16 budget, Jaitley had raised the service tax rate from 12.36 to 14 %. From November 15, 2015, an additional 0.5% Swachh Bharat cess had also come into force.
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