The proposal of Finance Minister Arun Jaitley in his Budget to increase service tax from 12.36 percent (including education cess) to 14 percent takes effect from June 1. Some of the important services that will attract higher tax and hence become costlier are railways, airlines, banking, insurance, advertising, architecture, construction, credit cards, event management and tour operators. Mobile operators and credit card companies have already started sending messages to subscribers conveying the increase in service tax rate.

According to railway ministry officials, fares for First Class and AC classes in passenger trains, besides freight charges, will go up by 0.5% from June 1. Fares for First Class and AC classes in passenger trains, besides freight charges, have increased by about 0.5 percent.

Jaitley had proposed to raise the service tax rate to 14 percent to facilitate a smooth transition to the Goods and Services Tax (GST) regime, which the government wants to roll out from April 2016. Once implemented, GST will subsume service tax, excise and other local levies.