In a move that could come as an enabler for the upcoming Goods and Services Tax regime, the government is planning to introduce two rates of service tax in the Union Budget, with one slab for essential services and another for non-essential services.
While the service tax on essential services will be lowered to 12 per cent from current 15 per cent, it will be increased to 18 per cent for non-essential services, sources said.
Finance Minister Arun Jaitley will present the Union Budget 2017 on February 1 where the announcement for the changes in Service Tax is likely to be made.
The changes will be effective till the GST comes into effect. The government plans to roll out the new tax regime from July 1, 2017.
New tax rates will help in the transition to GST as the new tax regime will have four-tier GST tax structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent.
Currently, 15 per cent service tax include 0.5 per cent Swachh Bharat cess and 0.5 per cent Krishi Kalyan Cess.
