A consistent rise at which services are taxed could be creating upward pressures on retail price inflation, which economists believe is hard to quantify because of its cascading impact on price of ultimate goods and services. 

The finance ministry is contemplating several reforms in the indirect tax space, even as the Goods and Services Tax (GST) has been caught in a political tussle. 

Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994. 

The news is that a service tax has been increased by 15% from 1 june 2016. Earlier, it was given in 14.5 %. Due to which their is hike in the Insurance policy and banking services.

Budget 2016 has proposed to impose a Cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services. 

The enhanced opportunities for availing credit for the taxes paid on input services would help a whole range of industries including construction and professional services firms and taxi operators, analysts said, as these businesses are now suffering from an accumulation of input tax expenses. 

The Krishi Kalyan Cess shall be in addition to any cess or service tax leviable on such taxable services under Chapter V of the Finance Act, 1994, or under any other law for the time being in force. 

The proceeds of the Krishi Kalyan Cess shall first be credited to the Consolidated Fund of India and the Central Government may, after due appropriation made by Parliament by law in this behalf, utilise such sums of money of the Krishi Kalyan Cess for such specified purposes. 

While presenting the Budget 2015, the FM had increased the Service Tax Rate from 12.36% to 14%. Moreover from 15th Nov 2015, Swachh Bharat Cess @ 0.5% also got applicable.

The rate hike, in step with the need to align the service tax with the proposed GST rate of 18-20%, would still yield significant additional revenue to the government.

Does increasing service tax is good? Prices of each goods, pulses, railway, taxi, fuel are at hike. Is it beneficial for common man? or will help in increasing the economy of country?