The government is planning to hike service tax rate in the upcoming Budget. The move towards GST may prompt the government to hike the service tax rate.

The government intends to roll out GST by April 1, 2016.

The government is keen on a gradual hike of service tax to cushion customers. A two percent service tax rate hike could yield over Rs 30,000 crore to the cash-starved government. A service tax rate change will need amendment in the Finance Act.

States will have the power to levy service tax under GST.

The government may prune exemptions on service tax to broaden the tax base and tweak the negative list and mega exemption list on service tax. The government had tweaked service tax exemptions in the negative list in the July Budget as well. As of now, 39 services are completely exempt from service tax.