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Get ready to spend more on these services

Last updated on: July 4, 2012 13:33 IST

Get ready to spend more on these services

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Priya Nair, Yogini Joglekar in Mumbai

Booking a holiday package online, attending a seminar, buying a designer dress and attending a coaching class will become costlier, thanks to the new service tax rates effective from July 1.

The service tax has been increased from 10.3 per cent to 12.36 per cent for some items and some new items have been brought under the tax net.

We look at some of the items which will have an impact.

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Coaching classes

Along with the pressure of finding quality education and the ever increasing school fees, educating your child has just gotten more dearer.

Reason: Fee to attend a coaching class will attract a higher service tax of 12.36 per cent now. For instance, if a student pays Rs 2 lakh as coaching fees, he will now have to pay Rs 24,720 over and above (as service tax), against Rs 20,600 earlier.

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"Companies conducting tests such as GMAT and GRE will charge more as these tests will also attract a higher service tax. All exams, including distance learning and executive management prorgammes, will get dearer too," says Chandan Dikshit, planning and strategy head at Rao IIT Academy.

Students wishing to give CFA exams will have to shell out more as the falling rupee and the higher service tax charges will add to the misery.

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Travel

Now, you will have to shell out that extra buck for travel-related services such as buying tour packages online and seeking help from agents in issuing passports and visas. Tickets bought for travel and holidays too will get costly.

Customers who are already feeling the pinch, given the repeated price increases due to fuel surcharges, rising airfares, rupee depreciation, will have to face the burden of the rise in service tax on tour packages.

Travel experts say a rise in the fee is not likely to hamper their growth. But, as far as holiday bookings are concerned, Indian travellers have shortened their trips and even compromised on luxury a little to alleviate the effect of rise in costs.

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Expedia's country head, Vikram Malhi, says, "With the rise in service taxes, instead of dropping their plans, travellers can cut corners, ditch European countries and head to SAE or domestic destinations, or in rare cases, even procrastinate plans for travel."

Madhavan Menon, managing director, Thomas Cook (India) Ltd agrees that all their products and services are impacted due to this rise, barring standalone cruises and transportation services like the Rail Europe.

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"While ancillary services are not directly impacted, a domino effect is expected to come into play for overseas travel on a whole."

Even visa charges will be more expensive. For instance, a student's visa to the USA costs around Rs 10,000.

A visa facilitation company usually charges a service fee over and above the visa charges. The service tax is calculated on this service fee and not on the visa charges. The service fee varies depending upon the country one is applying to.

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Events and seminars

Now, your employer will have to pay more for the workshops and seminars they want you to attend. In addition, arranging functions where you need event managers and planners will also become expensive.

Hence, going for such conferences, seminars, workshops, sports and cultural events where you are required to pay a fee is going to cost more, as the participation fee as well as organising these events will be subject to service tax.

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For instance, your company wants you to attend a day-long seminar on human resources for which the delegate fee is Rs 5,000. Earlier, the the service tax would have been Rs 515, but now it will be Rs 618.

"It is possible to cut down other expenses to accommodate the higher service tax and keep delegate fees unchanged," said an official of a trade body that organises seminars. Hence, the impact may not be much.

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Fashion designers

The designer dress you have been eying could also become dearer because of the higher service tax fashion designers have to charge now.

This also includes accessories. "Garment prices have gone up over the last year due to rising store rentals, which form a large component of our costs. This rise in service tax may not add much to garment prices,'' said the director of a leading retail chain.

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Speed post

Sending a rakhi to your brother in the USA this year will also cost more as speed post or express post is one of the other items on which service tax will be applicable.

If it costs Rs 2,500 to send a letter overseas (through a private courier company), the tax will be now Rs 309, instead of the earlier Rs 257.5.


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