The Government of India has reduced excise duty and service tax by 2 percent in its Interim Budget. The general excise duty has been reduced from 10 percent to 8 percent while service tax has been slashed from 12 percent to 10 percent.
The service tax cut will have a profound impact, both on people as well as on government, as it is levied on almost all services that we exercise in our day today lives, right from eating out in a restaurant, to watching a movie, to the charges on services given by various institutions such as banks, etc. For the government, the implications will be of Rs. 28000 crore.
"The measures will lead to revenue loss of Rs 13,000 crore in service tax, Rs 8,500 crore in excise duty and Rs 6,600 crore in customs duty" says Central Board of Excise and Customs Chairman P C Jha.
Even though tax cuts are inevitable in a recession hit economy, I wonder how much we can have of these as the government’s revenues are taking huge blows while giving away these. With the UPA government in the brink of completing its term, the next government is definitely going to bear the brunt of these.
The cut will be effective from midnight of Tuesday, 24th February 2009.