Monthly bills to cost less

Consumers battered by the steep price rise of the past one year can breathe a sigh of relief. A 2% reduction in service tax will directly touch the lives of over 500 million people by reducing their monthly expenses and leaving more money in their pockets.

From lower phone and credit card bills, cheaper international airline tickets and tour packages to a trimming of charges by health clubs and beauty parlours, the impact, though marginal, will be felt across most services needed on a daily basis. The impact will also extend to sectors as diverse as dry cleaning and internet cafes, outdoor catering, air cargo and repair services.

But the significance can be better understood by also factoring in that fuel is cheaper now, food prices have softened, inflation is at record lows and banks have cut interest rates for home and automobile loans.

The biggest beneficiary will be telecom, as this signals lower bills, or more talk time, for the 365-million mobile users in India. For pre-paid users, who account for over 93% of the subscribers, a Rs 350 recharge, for instance, will now give an additional Rs 10 of talk time while for post-paid users, it will mean a direct 2% reduction in their monthly bills.

���This move will help stimulate demand for products and services by making them more affordable, giving impetus to various measures taken to tide over this downturn,��� says Bharti Airtel president, CEO and joint MD Manoj Kohli.
Indians travelling abroad also have reason to smile. Air tickets for all first and business class passengers flying out of India could be cheaper by Rs 900 to Rs 8,000.

���Besides, there will be some relief on operating costs for us too, as several of our vendors such as inflight caterers, which charge service tax, will pass on the benefit,��� adds Air India director Jitendra Bhargava.

Tour operators also charge service tax on both domestic and international tour packages. The Indian Association of Tour Operators has said the exact extent of the cut was being worked out, but it would definitely help tourists and corporate travellers.

For credit card holders, the reduction in service tax comes as a breather. ���The 2% relief will come on 12% service charge levied on the interest rate of the outstanding credit amount. This can vary from 1.99-3.49%,��� says RL Prasad, head of credit cards at Standard Chartered Bank.

���Additional services will now come at a cheaper price,��� adds Oberoi Hotels vice-chairman SS Mukherjee. That will mean a reduction in health clubs, banqueting services and hotel business centre charges, but room rate, food and liquor prices would remain unchanged.

Cable television bills are also expected to become a tad cheaper. But DTH operators, on the other hand, said they would not pass on the benefits. Justifying this, Dish TV managing director Jawahar Goyal said the DTH industry is already providing subsidised services to its consumers. Restaurants and cinemas may stand to benefit as their rents will decrease by 2%, but alas, your restaurant tab and movie tickets will stay the same!