BRITAIN DEFLATION AND NEW SERVICE TAX RATE OF INDIA

Britain slips into deflation for the first time in 55 years

In News: The consumer price index, the official measure of inflation fell by 0.1% in the year to April 2015 in Britain. This means that the price of food, alcohol and clothing was cheaper last month than it would have been a year ago. It’s the first negative reading of the CPI since 1960.

What is deflation?

• It is when prices are declining over time. This is the opposite of inflation; when the inflation rate is negative, the economy is in a deflationary period.
• Deflation can occur because of a combination of four factors:
  • The supply of money goes down.
  • The supply of other goods goes up.
  • Demand for money goes up.
  • Demand for other goods goes down.

New service tax rate of 14% from June 1

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• The new service tax rate of 14% will come into effect from June 1.
• The service tax is currently levied at the rate 12.36%, including education cess.

What is service tax?

• Service tax is levied on all services, expect a small negative list. Advertising, air travel, services of architect, certain type of constructions, credit card, even management, and tour operator are some of the important services which attract tax.

Negative List: Budget 2012 revamped the taxation provisions for services by introducing a new system. In the new system all services, except those specified in the negative list, are subject to taxation.