The increase in service tax rates from 10 per cent to 12 per cent would mean higher telephone and restaurant bills as well as pricier air fares, among other things. But a considerable number of services will still be out of the ambit of this tax.
There also some interesting points to note in respect of taxes for insurance premia.
Negative list
As many as 17 activities have been kept out of the service tax ambit, which constitute a ‘negative' list.
So, education, renting out premises, using courier or postal services, taking a metered cab and watching movies are not going to burn a bigger hole in your pocket.
Interestingly, while normal railway fares will not have a service tax component, first-class or an air-conditioned coach will come under the compass.
Costlier premia
The Budget memorandum on service tax gives an important qualification on life insurance premium.
It states that if the entire premium paid is not allocated to risk cover, the first year's premium will be charged at three per cent and, in subsequent years, the tax will be 1.5 per cent.
This means that if you hold unit-linked insurance policies (ULIPs) that allocate only a small portion of the premium to risk cover, you may have to pay a higher cost. Endowment policies, too, may suffer a similar fate.
But pure term plans would not fall under this net.