NEW DELHI: Everything from your mobile bills to eating out in air-conditioned restaurants, a visit to a spa, dry cleaning charges and coaching classes fees are set to get more expensive with the government deciding to levy a 0.5% Swachh Bharat cess on all services that attract service tax.

The levy, which was announced in the budget, would be imposed from November 15, the finance ministry said in a statement on Friday. The government said Swachh Bharat cess would be used for meeting specific goals around Prime Minister Narendra Modi’s ambitious sanitation and cleanliness programme, which includes building toilets across the country.

READ ALSO: Swachh Bharat does not need new taxes but better deployment of existing ones

Although finance minister Arun Jaitley had not announced the list of services that would face the latest cess, there were indications that the levy would be imposed on high-end services such as five-star hotel bills. But the government has opted for an across-the-board load on consumers.

“A further increase of 0.5% service tax as Swachh Bharat cess will not only increase the effective service tax rate to 14.5% but also cause corporates to change their systems again to comply with this levy,” said Bipin Sapra, tax partner at consulting firm EY India. In the last budget, the government had increased the service tax rate from 12% to 14%, which is widely expected to increase once goods and services tax kicks in.

Some experts are, however, drawing comfort from the government notification. “In the budget, the finance ministry had said that it could be up to 2%, but the actual levy currently is much lower than anticipated,” said Anita Rastogi, indirect taxes partner at PricewaterhouseCoopers.

READ ALSO: Swachh Bharat may add 1% extra service tax to 5-star hotel bills

The government levies a slew of cesses and surcharges — ranging from the ones for education and health to those on petrol and diesel and petrol for highway construction — the latest one will only add to the burden. The cesses and surcharges are over and above the taxes that individuals and companies pay in the form of income tax, corporation tax, customs duty on imported goods, central excise, service tax and state levies such as VAT.

While all central taxes are budgeted to fetch the government Rs 14.5 lakh crore during the current fiscal year, cesses and surcharges add up to Rs 1.17 lakh crore, which is over 8% of all levies. A cess gives the Centre the freedom to spend the funds raised the way it wants to, instead of sharing 42% of the mop up with the states as is the case with central taxes. Businesses are also mandated other spending, which the government is unable to undertake due to strained public finances, such as allocating 2% of their profit on corporate social responsibility projects. These are not provided for in the budget.

“Swachh Bharat cess is not another tax but a step towards involving each and every citizen in making contribution to Swachh Bharat... This will translate into a tax of 50 paisa only on every Rs 100 worth of taxable services. The proceeds from this cess will be exclusively used for Swachh Bharat initiatives,” the official statement said. It then went on to argue that increased allocation for Swachh Bharat Abhiyan can prevent several diseases through better sanitation.

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