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Budget 2017: Will GST roll-out delay prompt Jaitley to hike service tax?

As things stand right now in the aftermath of the last two-day GST Council meet in January, it seems like the government is well on its way to miss its target of April 1, 2017, to implement the crucial Goods and Services Tax.

If that happens, according to a report in The Hindu Businessline, Finance Minister Arun Jaitley may announce a hike in the service tax rate in the upcoming budget. This year, the Union Budget will be presented on February 1 instead of Feb-end.

The report quoted unnamed sources saying that an increase in the service tax was being considered in the Budget which would help the government earn more revenue and also bring the service tax rate closer to the proposed standard rate under GST.

In its meet in November, the GST Council came up with four tax slabs to levy a charge on goods and services. Under the multi-layer regime, tax slabs of 5%, 12%, 18% and 28% were decided.

Currently, most services are taxed at 15%, whereas under the GST regime, they could be taxed at a higher 18%.

​In Budget 2016, Jaitley had hiked service tax to 15% from the then 14.5% by levying a Krishi Kalyan Cess, proceeds of which would be used for the welfare of farmers. At the time too, the move was touted as an initiative to slowly bring the service tax closer to the likely rate under the GST regime.