Investment in mutual funds and chit funds would become expensive with some of the service tax proposals announ... Read More

NEW DELHI: Investment in mutual funds and chit funds would become expensive with some of the service tax proposals announced in the Budget coming into effect from tomorrow.

Finance minister Arun Jaitley had came out with a host of proposals last month to rationalize service tax, which is levied at an effective rate of 12.36 per cent.

These also include raising the rate to 14 per cent, but that will come into effect from a date to be notified later by the government after the passage of the Finance Bill by Parliament.

However, the proposals which will come into effect from April 1, 2015 include tax exemption granted to services like admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve.

Similarly, life insurance scheme Varishtha Pension Bima Yojna, ambulance service, retail packing of fruits and vegetables, too will not attract service tax levy.

On the other hand, air travel will become expensive as service tax will now be levied on 60 per cent of the value of the ticket as against 40 per cent presently.

Services provided by Mutual Fund (MF) agents, marketing of lottery tickets, departmentally-run public telephone and free telephone calls from airport and hospitals will be subject to payment of service tax.

With regard to chit funds, the service tax will be paid by the chit fund foremen at full consideration received by way of fee, commission or any such amount.

They, however, would be entitled to claim Cenvat credit.