The service sector accounts for 57% of India’s GDP (Source: GoI)
The Govt of India is all set to tax the living daylights of this sector.
In the last budget, Service Tax regime changed in a dramatic fashion-from a positive list it changed to a negative list.So now all services (other than those in the negative list) will be taxed.
The Service Tax was also hiked from 10% to 12%- a hike of 20%
The govt intends to introduce the Goods & Services Tax (GST) soon in the next 12-18 months.Once the GST comes to force, the service tax will be hiked up to 16% (see here)
So effectively, in a span of two years, the service tax will be hiked from 10% to 16% an increase of 60%
From an investment perspective, this implies a high inflation regime and a negative outlook for the service sector such as hospitality, housing etc