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Indian Service Tax rises to 14% 1st June 2015

  • VAT
  • 31 May 2015 | Richard Asquith

Indian Service Tax rises to 14% 1st June 2015

Indian Service Tax is to increase from 12.36% effective rate to 14% on 1 July 2015. The rise was outlined in the last Indian budget.

The current tax, charged by the Centre, is a levy on a range of services including: telecoms; banking and finance; advertising; consulting; internet access; air travel; intellectual property supplies; restaurants; and hotel accommodation. Imports and exports of services are exempt from the tax. The list of exempt services is specified in a so-called negative list first issued in 2012. This mainly includes government supplies of water etc.

Service Tax is currently 12%, but comes with a 2% surcharge for the education cess on the 12%, making an effective rate of 12.36%. It was first introduced in 1995, and has risen sharply over the years.

The rise is part of a wider plan to raise the take of all indirect taxes to 25% of government revenues. In addition to tax rises, this includes broadening the tax base and a wholesale reform of Indian VAT and Service Tax by their replacement with a new Goods & Services Tax in 2016. This reform is seen as crucial to helping reduce double taxation of excessive bureaucracy that is costing the Indian GDP growth up to 2% per year.


VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.