The Rise And Rise Of Service Tax

Almost all economic activity today is subject to Service Tax. The tax began as a minor contributor to the government’s tax revenue but is today the third-largest head in the list. Given below is a simple chart explaining how Service Tax has been eating out of your pockets in recent years. 

Service Tax has been the fastest growing revenue head for the central government in recent times. Between 1997 and 2015, it registered a compound annual growth rate (CAGR) of 35%. In 2015, Service Tax became the third largest revenue head, overtaking revenue from custom duties. This was a result of a consistent increase in both, the scope of coverage as well as the rate of the tax.  It is hoped that with the introduction of the GST, and the integration of Service Tax into it, consumers would get some relief with respect to the rate of tax.

From 1st July, 2012, onwards, the government adopted the “negative list” approach. Under this, all services not mentioned in the list were automatically subject to Service Tax. This led to a substantial increase in its collections and in the number of services you have to pay Service Tax for.

Given below, is a chart mapping the growth in service tax from 1994 to present year.